CONTENTS

Share capital changes and shareholders 75

Directors, supervisors, senior management

members and employees 82

Corporate governance 94

Internal control 102

Financial statements 105

Documents available for inspection 105

Appendix: financial statements and

auditor’s report 106

Chairman’s statement 3

President’s report 4

Important notice 8

Definitions and important risks warning 12

Corporate profile 13

Financial and business data highlights 15

Report of the board of directors 21

Significant issues 72

2

Chairman:

Gao Jianping

3

Chairman:

Chairman’s StatementIn 2013, the Company actively grasped the development trends of interest rate liberalization, financial integration and information networking, persisted in making steady progress in business development and pursuing scientific development, continuously promoted the transformation, deepened the reform, stood up to the double challenges of slowdown in economic growth and drastic market fluctuation and reinforced its capacity of serving the real economy, hence ensuring the harmonious and healthy development of all its undertakings and laying a solid foundation for the realization of its five-year plan.

Improving corporate governance to promote its decision making quality and efficiency. Based on the shareholder structure characteristics after the additional share offering, under the basic principle of “according to the law and routine, keeping continuous work and being efficient and pragmatic”, the Company successfully completed the transition of the board of directors and the board of supervisors, further optimizing the specialty and age structure and further strengthening its ability in making strategies and controlling the direction. Optimized the combination of special committees during transition of the board of directors, the Company appropriately assigned its decision making authorization and improved professionality and efficiency of its decision making. The Company also made overall planning and coordinated the long-term benefits and short-term returns of shareholders, and earnestly fulfilled its commitment of continuous and steady cash dividends, realizing the net profit attributable to the shareholders of the parent company of RMB41.2 billion in the whole year, making another record high in business performance, and being awarded as the “Asian Bank Offering the Greatest Return to Shareholders 2013”. Moreover, the Company carried out capital market work and communication with investors with a broader field of vision, enhanced its benign interaction with clients, investors, media, the government and all walks of life and reinforced its image as a responsible mainstream listed bank, successfully ranking among the top 50 world banks, the top 500 enterprises of the world and the top 200 listed companies of the world.

Continuously deepening the reform to strengthen its operation management foundation. Sticking to “making steady progress in business development and pursuing scientific development”, the Company further established its specialized operation system focusing on the three major businesses including corporate finance, retail finance and financial markets, and constantly improved its management systems and mechanisms such as planning & finance, risk & compliance and human resources suitable to the business specialization operation. The Company also improved its management refinement level, adhered to its motivation orientation centering on the return on risk assets, made good use of the asset increment and revitalized its stock asset, and promoted the continual adjustment and optimization of its structure of assets and liabilities, making its capital adequacy ratio conform to regulatory requirement and ROE of 22%, keeping an advanced level in the industry. Meanwhile, with its accurate judgment of the policy environment and market environment changes, the Company reinforced its overall risk management, especially the liquidity and safety management, intensified the risk management and examination of potential risk field in key areas and industries, steadily carried forward the construction of new capital accord projects and the application of new risk management instruments and avoided and disposed asset losses in a timely manner, keeping a leading position in asset quality in the industry with provision coverage ratio of 352%.

Intensifying synergistic operation to promote inclusive finance. Actively taking the policy opportunity, the Company was approved to establish CIB Fund Management Co., Ltd., increased the capital of China Industrial International Trust Limited and was approved to become a licensed bank in Hong Kong, with the business scale and business performance of its subsidiaries growing vigorously and the synergistic effect of comprehensive operation being further revealed. Meanwhile, the Company also actively fulfilled its obligations as a “corporate citizen” and stressed the differential operation and characteristic development, effectively promoting and carrying out the state’s macro policies and enhancing its core competitiveness while realizing its own sustainable and healthy development. Comprehensively fulfilling its commitment as an “Equator Bank”, the Company also made innovations on the development of the financial business of urbanization, constantly enriched the green financial product line and facilitated the construction of the “Beautiful China” through promoting the transformation of economic development mode and industry transformation and upgrading via optimizing credit resource allocation. By implementing the inclusive finance concept and providing more and better service to the general public, the Company accelerated the construction of community bank and retail credit factory, and cultivated business brands like small enterprise finance, tour finance and pension finance to provide much more convenient financial services for all walks of life. Through giving play to the innovative and leading function of the bank-to-bank platform, the Company delivered its management experience, financial products and technological capabilities to the vast small and medium-sized financial institutions, effectively covering both urban and rural areas, serving the “agriculture, farmers and rural areas” with increasingly obvious scale benefits.

In 2014, the Company will adhere to the operation principles of a modern bank group, persist in the market orientation, deepen our internal reform, improve our executive force, break the restriction of factors via operational transformation, reinforce and improve our financial services and transform the achievements of the reform and development into our core competitiveness so as to play our role in paving and bridging in the comprehensive economic and social reform of China. We will continue to seize and take the new round of historical development opportunities, and further promote shareholder returns, customer satisfaction and market reputation to facilitate our sustainable development.

4

In 2013, facing the complex and severe economic situation and the much more changeable market environment, the Company has diligently carried out various resolutions of the board of directors, and stringently implemented the state’s macro policies and financial regulatory requirements. It continued to reform and innovate, steadily developed businesses, served entities and carried out differential development, thus achieving sustaining, harmonious and healthy growth in various businesses.

As at the end of the reporting period, the total assets of the Company stood at RMB3,677.435 billion, up 13.12% from the beginning of the period. The balance of deposits amounted to RMB2,170.345 billion and the balance of loans stood at RMB1,357.057 billion, representing increases of 19.69% and 10.40% respectively compared with the beginning of the period. The balance of NPLs was RMB10.331 billion. The NPL ratio was 0.76% with an increase of 0.33 percentage point over the beginning of the period, reflecting the influence of the real economy on bank asset quality during the transition period, for which the Company had increased the provision for NPLs to reinforce its ability against risks with provision coverage ratio of 352.10% and provision-to-loan ratio of 2.68% at the end of the period. The operating efficiency was consistent with the expectation. The operating income broke through hundred billion for the first time with profitability continuously outperforming and net profit attributable to the shareholders of the parent company standing at RMB41.211 billion, up 18.70% year-on-year.

The Company strengthened and improved its specialized operation system and continuously propelled the transformation of its management and business development model. With regard to corporate finance businesses, its investment banking business scale was continuously expanded with underwritten offering of debt financing instruments of RMB241.249 billion, ranking the first among the same type of joint-stock banks; and its green finance business was constantly upgraded with the financing balance of RMB178.097 billion at the end of the period and brand impact being further expanded. On retail businesses, the daily average scale of comprehensive financial assets of its retail clients grew rapidly to RMB666.776 billion; the development of its tour finance and pension finance kept a good momentum; and the construction of community banks and “retail credit factory” was launched with good implementation and operation. In respect to financial markets businesses, the scale benefit of its bank-to-bank platform was increasingly obvious with further exploration of development space; the net value of asset custody exceeded RMB3 trillion with a growth of approximately 90%, ranking the first among the same type of joint-stock banks; and its commissioned businesses such as interest rate swap, currency swap and precious metals trading maintained the dominant position continuously.

Centering on transformation development and market changes, the Company proactively strengthened business management, improved the operation and support safeguard level and actively coordinated with various external inspections, audits and researches, constantly improving its management standardization and transparency. Moreover, sticking to capital intensity orientation, the Company also improved its evaluation and resource allocation management, established and perfected a new liquidity management system, properly dealt with the rapid fluctuation of market liquidity, accelerated the establishment of a refined interest rate pricing system and actively coped with the challenges from interest rate liberalization. In addition, the Company comprehensively reinforced the risk management of emerging businesses, improved the institutional system, completed risk classification, made reasonable provisions and strengthened monitoring analysis. Meanwhile, the Company successfully opened up its Lanzhou Branch, prepared to establish Haikou Branch and Xining Branch, and was granted the licensed bank in Hong Kong. Besides, its third holding subsidiary—CIB Fund Management Co., Ltd. was successfully approved opening by authorities and started into business with its group-oriented and comprehensive operation management reaching a new level and the synergistic effect of business being further revealed.

In 2014, the Company will continue to carry out the state macro economic policies and financial regulatory requirements, and earnestly implement the business strategy and development plan defined by the board of directors. We will keep the steady development trend, accelerate transformation and innovation, and continuously promote the business specialization and management refinement level to achieve new progress and new breakthrough in various businesses.

President:

President’s report

5

Director and President:

Li Renjie

6

Chairman of the Board of Supervisors:

Kang Yukun

7

8

The Company’s board of directors, board of supervisors, directors, supervisors and senior management

members hereby warrant that the information contained in this report is free from any false representation,

misleading statement or material omission, and assume joint and several liabilities for the truthfulness,

accuracy and completeness of the contents herein contained.

The Company’s annual report 2013 and its abstract were reviewed and approved at the fourth meeting of the

eighth session of the board of directors on March 28, 2014. Fifteen directors should attend the meeting, and

fifteen directors were in fact present. There were no directors, supervisors or senior management members

who could not warrant or disagreed with the truthfulness, accuracy and completeness of the contents of this

annual report.

The financial data and indicators contained in this annual report were prepared in compliance with the PRC

Generally Accepted Accounting Principles. Unless otherwise specified, they represented the consolidated data

of Industrial Bank Co., Ltd. and its wholly-owned subsidiary Industrial Bank Financial Leasing Co., Ltd., its

controlled subsidiaries China Industrial International Trust Limited and CIB Fund Management Co., Ltd. The

monetary sums expressed in RMB in this annual report.

Deloitte Touche Tohmatsu Certified Public Accountants LLP has audited the Company’s financial statements

2013 in accordance with the Chinese Auditing Standards (“CAS”) and has issued a standard auditor’s report

with unqualified opinions.

The Company’s chairman Gao Jianping, president Li Renjie and general manager of the financial department

Li Jian hereby warrant that the financial statements in the annual report 2013 are true, accurate and complete.

The proposal of profit distribution for the reporting period considered by the board of directors: based on the

total capital of 19,052,336,751 shares, cash dividend of RMB4.6 (inclusive of tax) should be distributed for

every 10 shares.

Investors are advised to read the full content of this annual report carefully. Perspective and forward-looking

statements regarding future financial conditions, operating performance, business development and business

plan contained in this report do not constitute any substantive commitment of the Company to investors.

Investors should pay attention to investment risks.

ImPoRtant notICe

9

Unit: RMB million

Annual achievements 2013 2012 2011

Net interest income 85,845 72,193 507,34

Net non-interest income 23,442 15,426 9,136

Operating income 109,287 87,619 59,870

Operating profit 54,078 46,068 33,532

Total profit 54,261 46,193 33,664

Net profit attributable to the shareholders of the parent company 41,211 34,718 25,505

Net profit attributable to the shareholders of the parent company, after deduction of non-recurring gains and losses

40,998 34,585 25,315

Total dividend 8,764 7,240 3,991

As at the end of year

Total assets 3,677,435 3,250,975 2,408,798

Total loans 1,357,057 1,229,165 983,254

Loan loss provision 36,375 24,623 14,314

Total liabilities 3,476,264 3,080,340 2,292,720

Total deposits 2,170,345 1,813,266 1,345,279

Equity attributable to the shareholders of the parent company 199,769 169,577 115,209

Share capital 19,052 12,702 10,786

Per share

Basic earnings per share (RMB) 2.16 2.15 1.57

Diluted earnings per share (RMB) 2.16 2.15 1.57

Basic earnings per share, after deduction of non-recurring gains and losses (RMB)

2.15 2.14 1.57

Net assets per share attributable to the shareholders of the parent company (RMB)

10.49 13.35 10.68

Dividend per share (pre-tax, RMB) 0.46 0.57 0.37

Major financial ratios

Return on total assets (%) 1.20 1.23 1.20

Weighted average return on equity (%) 22.39 26.65 24.67

Net interest margin (%) 2.44 2.65 2.49

Cost-to-income ratio (%) 26.71 26.73 31.95

Loan-to-deposit ratio (%) 61.95 66.50 71.46

Asset quality indicator

Non-performing loan ratio (%) 0.76 0.43 0.38

Provision coverage ratio (%) 352.10 465.82 385.30

Provision-to-loan ratio (%) 2.68 2.00 1.46

Capital indicator

Net capital 250,183 - -

In which: Core tier one capital 201,153 - -

Total weighted risk assets 2,310,471 - -

Capital adequacy ratio (%) 10.83 - -

Core tier one capital ratio (%) 8.68 - -

Financial highlights

The Company ranked No. 428 in the “2013 List of Fortune Global 500 Companies” released by the US magazine, Fortune. According to the list of “Top 1000 World Banks 2013” of the British Magazine, The Banker, the Company rose to the 50th place by 11 positions over the last year in terms of total assets, and ranked No.55 in terms of Tier 1 capital, up by 14 positions over the previous year.According to the list of “Top 2000 World Enterprises 2013” of the US Magazine, Forbes, the Company rose to No. 142 by 101 positions over the last year.According to the International Financial Reporting Standards (IFRS), the Company ranked No. 47 among the top 100 world banks in terms of total assets. In the 8th Asian 21st Century Annual Finance Summit and Release Ceremony for the Research Report on 2013 Asian Banks Competitiveness Ranking, the Company ranked No.7 in terms of bank competitiveness and topped China's joint-stock banks. In addition, it also won the prize of “Asian Bank Offering the Greatest Returns to Shareholders 2013”.The Company won the “Best Board of Directors” in the Ninth “Gold Prize of Round Table” of Chinese Boards of Listed Company. The Company won the “2013 Golden Shield Award of Best Investor Relations Among Chinese Listed Companies” in the Fourth Risk Management Summit of Chinese Listed Company. The Company ranked No. 2 in the 2013 Top 100 Enterprises with Capital Brand Value by China Center for Market Value Management (CCMVM). The Company won the “Prize of 2013 Outstanding Enterprise in Corporate Social Responsibility” in the Sixth China Corporate Social Responsibility Summit jointly sponsored by Xinhuanet and the Research Center for Corporate Social Responsibility of Chinese Academy of Social Sciences. The Company was awarded the “Prize of Financial Institution for Social Responsibility of the Year” and the “Prize of Best Green Finance for Social Responsibility” by China Banking Association. The Company was awarded the “Best Corporation Prize for Sustainable Development” in 2013 by China Urban Economy Sustainable Development Committee. The Company was awarded the “E-payment Service Star” and the “Best User Experience Prize for Internet Banking” by China Financial Certification Authority (CFCA) and Xinhuanet.

The Company won four prizes: “2013 Competitive Bank for Outstanding Supply Chain Financial Service”, “2013 Competitive Bank for Green Financial Service”, “2013 Competitive Bank for Personal Loans”, and “2013 Competitive Bank for the Development Potential in Private Banking” issued by Chinese Academy of Social Sciences and China Business Journal.The Company won the “Prize of Best Internet Banking” and the “Prize of Best Financial APP Product of China” by Securities Times. The Company was named the “2013 CFV—Best Innovative Bank for Trade Financing” and “2013 Prize of Best Bank for Custody Service” by China Business News. The Company was awarded the “Prize of Best Bank for Asset Custody” and the “Best Bank for the Development Potential in Private Banking” of the 2013 Assets Management Golden-shell Award of China sponsored by 21st Century Business Herald.The Company won the “2012-2013 Prize of Outstanding Bank for Custody Service” sponsored by The Economic Observer. The Company was awarded the “Prize of Retail Banking for Social Responsibility of the Year” sponsored by Financial Money. The Company won the “Prize of Best Retail Banking” sponsored by China Times. The Company was awarded the “2013 Prize of Best Bank Financial Product of China”, the “2013 Prize of Best Brand for Small Enterprise Financial Service of China”, and the “2013 Prize of Best Innovative Bank for Credit Service” sponsored by Money Week.The Company was awarded the “Prize of Best Financial Product” and the “Prize of Best Innovative Bank for Credit” in the financial circle. The Company won the “Prize of Private Banking for Growth of the Year” at 2013 Banking Industry Development Forum and the First Comprehensive Appraisal of Banks sponsored by Sina Finance. The Company won the “Prize of Best Bank for Wealth Management” and the “Prize of Best Platform for Precious Metal Transaction” sponsored by Eastmoneycom. The Company won the “2013 Prize of Best Private Banking of China”, the “Prize of Best Brand for Wealth Management” and the “Prize of Best Bank for Precious Metal Service” sponsored by hexun.com

Honors and Awards

The Company ranked No. 428 in the “2013 List of Fortune Global 500 Companies” released by the US magazine, Fortune. According to the list of “Top 1000 World Banks 2013” of the British Magazine, The Banker, the Company rose to the 50th place by 11 positions over the last year in terms of total assets, and ranked No.55 in terms of Tier 1 capital, up by 14 positions over the previous year.According to the list of “Top 2000 World Enterprises 2013” of the US Magazine, Forbes, the Company rose to No. 142 by 101 positions over the last year.According to the International Financial Reporting Standards (IFRS), the Company ranked No. 47 among the top 100 world banks in terms of total assets. In the 8th Asian 21st Century Annual Finance Summit and Release Ceremony for the Research Report on 2013 Asian Banks Competitiveness Ranking, the Company ranked No.7 in terms of bank competitiveness and topped China's joint-stock banks. In addition, it also won the prize of “Asian Bank Offering the Greatest Returns to Shareholders 2013”.The Company won the “Best Board of Directors” in the Ninth “Gold Prize of Round Table” of Chinese Boards of Listed Company. The Company won the “2013 Golden Shield Award of Best Investor Relations Among Chinese Listed Companies” in the Fourth Risk Management Summit of Chinese Listed Company. The Company ranked No. 2 in the 2013 Top 100 Enterprises with Capital Brand Value by China Center for Market Value Management (CCMVM). The Company won the “Prize of 2013 Outstanding Enterprise in Corporate Social Responsibility” in the Sixth China Corporate Social Responsibility Summit jointly sponsored by Xinhuanet and the Research Center for Corporate Social Responsibility of Chinese Academy of Social Sciences. The Company was awarded the “Prize of Financial Institution for Social Responsibility of the Year” and the “Prize of Best Green Finance for Social Responsibility” by China Banking Association. The Company was awarded the “Best Corporation Prize for Sustainable Development” in 2013 by China Urban Economy Sustainable Development Committee. The Company was awarded the “E-payment Service Star” and the “Best User Experience Prize for Internet Banking” by China Financial Certification Authority (CFCA) and Xinhuanet.

The Company won four prizes: “2013 Competitive Bank for Outstanding Supply Chain Financial Service”, “2013 Competitive Bank for Green Financial Service”, “2013 Competitive Bank for Personal Loans”, and “2013 Competitive Bank for the Development Potential in Private Banking” issued by Chinese Academy of Social Sciences and China Business Journal.The Company won the “Prize of Best Internet Banking” and the “Prize of Best Financial APP Product of China” by Securities Times. The Company was named the “2013 CFV—Best Innovative Bank for Trade Financing” and “2013 Prize of Best Bank for Custody Service” by China Business News. The Company was awarded the “Prize of Best Bank for Asset Custody” and the “Best Bank for the Development Potential in Private Banking” of the 2013 Assets Management Golden-shell Award of China sponsored by 21st Century Business Herald.The Company won the “2012-2013 Prize of Outstanding Bank for Custody Service” sponsored by The Economic Observer. The Company was awarded the “Prize of Retail Banking for Social Responsibility of the Year” sponsored by Financial Money. The Company won the “Prize of Best Retail Banking” sponsored by China Times. The Company was awarded the “2013 Prize of Best Bank Financial Product of China”, the “2013 Prize of Best Brand for Small Enterprise Financial Service of China”, and the “2013 Prize of Best Innovative Bank for Credit Service” sponsored by Money Week.The Company was awarded the “Prize of Best Financial Product” and the “Prize of Best Innovative Bank for Credit” in the financial circle. The Company won the “Prize of Private Banking for Growth of the Year” at 2013 Banking Industry Development Forum and the First Comprehensive Appraisal of Banks sponsored by Sina Finance. The Company won the “Prize of Best Bank for Wealth Management” and the “Prize of Best Platform for Precious Metal Transaction” sponsored by Eastmoneycom. The Company won the “2013 Prize of Best Private Banking of China”, the “Prize of Best Brand for Wealth Management” and the “Prize of Best Bank for Precious Metal Service” sponsored by hexun.com

Honors and Awards

12

DeFInItIonS anD ImPoRtant RISK WaRnInG

I. DefinitionsIn this report, unless the context otherwise specified, the following terms have the meanings set forth below:

Industrial Bank / the Company Industrial Bank Co., Ltd.

CSRC China Securities Regulatory Commission

CSRC Fujian Bureau Fujian Bureau under China Securities Regulatory Commission

Central Bank The People’s Bank of China

CBRC China Banking Regulatory Commission

CBRC Fujian Bureau Fujian Bureau under China Banking Regulatory Commission

Deloitte Touche Tohmatsu Deloitte Touche Tohmatsu Certified Public Accountants LLP

Industrial Leasing Industrial Bank Financial Leasing Co., Ltd.

Industrial Trust China Industrial International Trust Limited

Industrial Fund CIB Fund Management Co., Ltd.

Non-public Offering in 2012

the offering approved by CSRC, and on December 31, 2012, the Company offered 1,915,146,700 A shares in total to China People’s Insurance (Group) Co., Ltd., The People’s Insurance Company of China, China Life Insurance Company Limited, China National Tobacco Corporation and Shanghai Zheng Yang International Business Co., Ltd.

New capital requirements being measured in accordance with the Capital Rules for Commercial Banks (Provisional) (Implemented from 2013) of CBRC

Old capital requirements being measured in accordance with the Administrative Measures for Capital Adequacy Ratios of Commercial Banks (Implemented from 2004 and revised in 2007) of CBRC

Yuan RMB Yuan

II. Important risk warningThe board of directors specially reminds investors that the risk factors the Company is subject to have been

listed in detail in this report. Please refer to “Report of the Board of Directors” for risk factors the Company is

subject to and the risk management analysis.

13

CoRPoRate PRoFILe

Legal Chinese name: 兴业银行股份有限公司 (Abbreviation: 兴业银行 )

Legal English name: INDUSTRIAL BANK CO., LTD.

Legal representative: Gao Jianping

Secretary of the board of directors: Tang Bin

Representative of securities affairs: Chen Zhiwei

Address: 154 Hudong Road, Fuzhou, PRC

Postcode: 350003

Tel : (86) 591-87824863

Fax: (86) 591-87842633

Investor email: irm@cib.com.cn

Registered address: 154 Hudong Road, Fuzhou, PRC

Office address: 154 Hudong Road, Fuzhou, PRC

Postcode: 350003

Website: www.cib.com.cn

Designated newspapers for information disclosure:

China Securities Journal, Shanghai Securities News, Securities Times, Securities Daily

Website designated by CSRC for publishing annual reports:www.sse.com.cn

Location of annual reports filing: the Company’s office of the board of directors

Place of stock listing: Shanghai Stock Exchange

Stock abbreviation: Industrial Bank

Stock code: 601166

Changes of registration :

Date of first registration: August 22, 1988

Place of first registration: Fujian Provincial Administration of Industry and Commerce

Date of registration change: March 21, 2014

14

Place of registration change: Fujian Provincial Administration of Industry and Commerce

Corporate entity business license No.: 350000100009440

Taxation registration no.: State Tax Rongtai Zi 350100158142711

Local Tax Min Zi 350102158142711

Code for corporate legal entity: 15814271-1

Change of principal business: There is no change in the Company’s principal business since its listing.

Change of major shareholders: The Company’s largest shareholder is the Finance Bureau of Fujian Province,

and there is no change since the Company was listed.

Other related information of the Company:

Certified public accountants firm engaged by the Company: Deloitte Touche Tohmatsu Certified Public

Accountants LLP

Office address: 30th Floor, Bund Center, 222 Yan An East Road, Shanghai, PRC

Names of the signing accountants: Tao Jian, Shen Xiaohong

Sponsor performing continuous monitoring: Credit Suisse Founder Securities Limited

Office address: 15th floor, South Wing, Central Financial Street, No. A9, Financial Avenue, Xicheng District, Beijing

Names of signing representatives of sponsor: Guo Yuhui, Li Hui

Period for continuous monitoring: From January 8, 2013 to December 31, 2014

This report is prepared in both Chinese and English. Should there be any discrepancy in interpretation, the Chinese version shall prevail.

15

FInanCIaL anD BuSIneSS Data hIGhLIGhtS

I. Key accounting data and financial indicators of the previous three years as at the end of the reporting period

Unit: RMB million

Item 2013 2012Increase/decrease in 2013

compared with 2012 (%)2011

Operating income 109,287 87,619 24.73 59,870

Profit before tax 54,261 46,193 17.47 33,664

Net profit attributable to the shareholders of the parent company

41,211 34,718 18.70 25,505

Net profit attributable to the shareholders of the parent company, after deduction of non-recurring gains and losses

40,998 34,585 18.54 25,315

Basic EPS (RMB) 2.16 2.15 0.47 1.57

Diluted EPS (RMB) 2.16 2.15 0.47 1.57

Basic EPS, after deduction of non-recurring gains and losses (RMB)

2.15 2.14 0.47 1.57

ROA (%) 1.20 1.23 Down 0.03 percentage point 1.20

Weighted average ROE (%) 22.39 26.65 Down 4.26 percentage points 24.67

Weighted average ROE, after deduction of non-recurring gains and losses (%)

22.27 26.54 Down 4.27 percentage points 24.49

Cost-to-income ratio 26.71 26.73 Down 0.02 percentage point 31.95

Net cash flow from operating activities 209,119 116,701 79.19 (7,885)

Net cash flow per share from operating activities (RMB)

10.98 9.19 19.48 (0.73)

December 31, 2013

December 31, 2012

Increase/decrease at the end of 2013 compared with the

end of 2012 (%)

December 31, 2011

Total assets 3,677,435 3,250,975 13.12 2,408,798

Shareholders’ equity attributable to the shareholders of the parent company

199,769 169,577 17.80 115,209

Net assets per share attributable to the shareholders of the parent company (RMB)

10.49 13.35 -21.42 10.68

NPL ratio (%) 0.76 0.43 Up 0.33 percentage point 0.38

Provision coverage ratio (%) 352.10 465.82Down 113.72 percentage

points385.30

Provision-to-loan ratio (%) 2.68 2.00 Up 0.68 percentage point 1.46

16

Items and amounts of non-recurring gains and losses:

Unit: RMB million

Item 2013 2012 2011

Gains and losses on the disposal of non-current assets (28) (2) 14

Government grants recognized in profit or loss 162 119 89

Write-back of assets written-off in previous years 113 54 124

Net non-operating income & expense in addition to the above

49 8 29

Impact on income tax (83) (46) (66)

total 213 133 190

Note: The Company implemented the profit distribution plan 2012 during the reporting period, distributed 5 bonus shares and

cash dividend of RMB5.7 for every 10 shares with total shares changing into 19,052,336,751, increasing by 6,350,778,917

shares. The EPS during each comparison period had been recalculated according to the provisions of the No. 9 Rule

for the Preparation and Reporting of Information Disclosure of Companies with Public Offering – the Calculation and

Disclosure of ROE and EPS (revised in 2010) issued by CSRC.

The opening balance of net assets value per share attributable to the shareholders of the parent company and the net

cash flow per share from operating activities in the same period of last year were not adjusted with the Company’s new

shares after the issuance of additional shares as dividends. In the table, the net assets value per share at the end of

2013 decreased comparing with that at the end of 2012, which was caused by the issuance of additional shares and

equity expansion during the reporting period. Irrespective of this factor, the net assets value per share at the end of 2013

increased by 17.80% comparing with that at the end of 2012.

II. Supplementary financial dataUnit: RMB million

Item December 31, 2013 December 31, 2012 December 31, 2011

Total liabilities 3,476,264 3,080,340 2,292,720

Placements from banks and other financial institutions

78,272 88,389 52,752

Total deposits 2,170,345 1,813,266 1,345,279

Incl: Demand deposits 907,078 748,299 598,852

Time deposits 979,043 820,468 571,238

Other deposits 284,224 244,499 175,189

Total loans 1,357,057 1,229,165 983,254

Incl: Corporate loans 988,808 912,187 703,948

Individual loans 353,644 299,936 260,641

Discounted bills 14,605 17,042 18,665

Loan loss provisions 36,375 24,623 14,314

17

III. Capital adequacy ratioUnit: RMB million

Key indicator December 31,

2013December 31,

2012December 31,

2011

According to the Capital Rules for Commercial Banks (Provisional) (new capital requirements)

Net capital 250,183 N/A N/A

Incl: Core tier one capital 201,153 N/A N/A

Other tier one capital - N/A N/A

Tier two capital 50,663 N/A N/A

Deductions 1,633 N/A N/A

Total risk weighted assets 2,310,471 N/A N/A

Capital adequacy ratio (%) 10.83 N/A N/A

Tier one capital adequacy ratio (%) 8.68 N/A N/A

Core tier one capital adequacy ratio (%) 8.68 N/A N/A

According to the Administrative Measures for Capital Adequacy Ratios of Commercial Banks, and etc. (old capital requirements)

Net capital 253,548 210,890 148,715

Incl: Core capital 197,320 163,639 111,591

Supplementary capital 58,472 49,209 38,839

Deductions 2,244 1,958 1,715

Risk weighted assets 2,112,778 1,737,456 1,344,130

Market risk capital 1,188 867 258

Capital adequacy ratio (%) 11.92 12.06 11.04

Core capital adequacy ratio (%) 9.21 9.29 8.20

18

IV. Supplementary financial indicators Unit: %

Key indicatorStandard

valueDecember 31,

2013December 31,

2012December 31,

2011

Loan-to-deposit ratio (converted to RMB) ≤75 61.95 66.50 71.46

Liquidity ratio (converted to RMB) ≥25 35.79 29.47 30.71

Proportion of loans to the largest single borrower

≤10 7.06 4.34 4.45

Proportion of loans to the top ten borrowers

≤50 23.72 21.81 23.54

Migration ratio of pass loans - 1.20 0.77 0.54

Migration ratio of special mention loans - 30.48 8.28 21.59

Migration ratio of substandard loans - 97.63 72.34 63.94

Migration ratio of doubtful loans - 30.41 20.02 14.18

Note: 1. Data in this table are those before consolidation, and data of Industrial Leasing, Industrial Trust and CIB Fund

Management are not included in this table.

2. Loan-to-deposit ratio, liquidity ratio, proportion of loans to the largest single borrower, proportion of loans to the top ten

borrowers, and migration ratios in this table are calculated based on data reported to regulatory authorities.

3. Pursuant to Document YJF [2008] No. 187, Document YJF [2006] No. 345 and Document YJF [2005] No. 253 issued

by CBRC, loans originated from funds raised from the Company’s financial bonds offering are not included in loan-to-

deposit ratio calculation.

4. Pursuant to Document YJF [2007] No. 84 issued by CBRC, starting from 2008, when calculating the loan-to-deposit

ratio, there is no need to deduct “discount” from “loans” in the numerator.

5. Pursuant to Document YJF [2010] No. 112 issued by CBRC, starting from 2011, the daily average loan-to-deposit ratio

per month shall be additionally supervised. The index of the Company’s daily average loan-to-deposit ratio of every

month during the reporting period has met the supervisory and regulatory requirements.

V. Changes in shareholders’ equity during the reporting periodUnit: RMB million

ItemBeginning

balanceIncrease during

the periodDecrease during

the periodClosing balance

Share capital 12,702 6,350 - 19,052

Capital reserve 50,021 - 3,779 46,242

General reserve 28,923 2,402 - 31,325

Surplus reserve 6,648 3,176 - 9,824

Undistributed earnings 71,283 41,211 19,168 93,326

Shareholders’ equity attributable to the shareholders of the parent company

169,577 53,139 22,947 199,769

19

VI. Items measured at fair valueUnit: RMB million

ItemDecember 31,

2012

Gains and losses in the period from changes in

fair value

Accumulated changes in

fair value recognized in

equity

Provision for impairment

made in the period

December 31, 2013

Held-for-trading financial assets 21,540 (595) - - 42,295

Precious metals 4,976 163 - - 276

Derivative financial assets 3,266(722)

- - 6,414

Derivative financial liabilities 2,996 - - 6,864

Available-for-sale financial assets 192,057 - (6,144) - 263,681

Held-for-trading financial liabilities - 12 - - 1,216

1. Held-for-trading financial assets: the held-for-trading financial assets are primarily the RMB bonds held for

the purpose of market making trading. The Company adjusted the position of its held-for-trading RMB bonds

in a dynamical process, based on the trading activity level in the bond market and its judgment on the market

movement. In the reporting period, the Company increased the investment in the held-for-trading bonds, and

the changes of fair value had a minor impact relative to the scale.

2. Precious metals: being subject to impact of the proprietary precious metal trading strategy and market

movement, the Company decreased its cash position of precious metal during the reporting period, and its

balance in domestic precious metals spot trading at the end of the reporting period decreased by RMB4.7

billion compared with the beginning of the period.

3. Derivative financial assets and liabilities: the absolute values of derivative financial assets and liabilities

increased compared with the beginning of the period. The overall offset balance decreased slightly, meaning

that gains from the changes in fair value of the financial derivatives investment in the period decreased

slightly.

4. Available-for-sale financial assets: the Company increased its investment in available-for-sale financial

assets during the reporting period under the need of asset allocation and management, as well as its judgment

on the bond market movement and analysis of the interbank market liquidity.

5. Held-for-trading financial liabilities: the Company’s held-for-trading financial liabilities are mainly sale of

bonds borrowed and short sale gold transactions. As at the end of the reporting period, the position was

mainly the short sale of precious metals.

20

From left to right:

Xue hefeng

Lin Zhangyi

Chen Dekang

Li Renjie

Jiang Yunming

Chen Jinguang

Li Weimin

Vice president:

Director and vice president:

Vice president:

Director and president:

Director and vice president:

Vice president:

Vice president:

21

RePoRt oF the BoaRD oF DIReCtoRS

I. Discussion and analysis of operations during the reporting period

(I) Review of operations during the reporting period

1. Overall operations of the Company

During the reporting period, the macro-economic situation was complex and severe, and the market

environment was under more changes. Facing the rather difficult business environment, the Company earnestly

implemented the state’s macro policies and financial regulatory requirements, carried out reform and innovation,

kept prudent operation, served entities, prevented risks and stood up to the challenges of the downward

pressure of economy, mass risk exposure in some regions and some industries, market liquidity and interest

rate fluctuation, thus all the business segments witnessed a sustainable, coordinated and healthy development,

with both the business scale and profit performance hitting a record high and the asset quality remaining stable.

(1) Breakthroughs were made in the Company’s comprehensive strength. As at the end of the reporting

period, the Company’s total assets was RMB3,677.435 billion, up 13.12% from the beginning of the period;

the balance of deposits in local and foreign currencies stood at RMB2,170.345 billion, up 19.69% from the

beginning of the period; the balance of loans in local and foreign currencies was RMB1,357.057 billion, up

10.40% from the beginning of the period. The Company successfully completed targeted additional share

offering, substantially improving its capital strength; the shareholders’ equity attributable to the parent

company as at the end of the reporting period was RMB199.769 billion, up 17.80% from the beginning of

the period; the net capital reached RMB250.183 billion; the capital adequacy ratio was 10.83% and the core

(tier one) capital adequacy ratio was 8.68%. The asset-liability ratio was in good condition, and all the main

indicators were in line with the supervisory and regulatory requirements. During the reporting period, the net

profit attributable to the shareholders of the parent company was RMB41.211 billion, up 18.70% year-on-

year; the fee and commission income amounted to RMB24.736 billion, up 57.75% year-on-year; being subject

to the equity expansion due to the targeted additional share offering, the weighted average ROE in 2013

was 22.39%, down 4.26 percentage points year-on-year, and the return on total assets decreased by 0.03

percentage point year-on-year to 1.20%. The asset quality remained stable, with the NPL ratio at 0.76%, up 0.33

percentage point compared with that at the beginning of the period; the provision coverage ratio was 352.10%

and the provision-to-loan ratio was 2.68%, further enhancing the capability in withstanding risks. The full-year

profit of its wholly-owned subsidiary Industrial Leasing was RMB873 million, and that of Industrial Trust was

RMB1,106 million, up 30.88% and 43.26% year-on-year respectively, and profit was also realized by CIB Fund

Management after establishment, indicating a steady development of comprehensive business operations

across different segments.

(2) New results were achieved in the operational transformation. The Company further established its

specialized operation system focusing on the three major businesses including corporate finance, retail finance

and financial markets. With regard to corporate finance businesses, adapting to the financial disintermediation

tendency, its investment banking business developed rapidly with underwriting amount and market share of

debt financing instruments in non-financial enterprises ranking top of the market; the trade financing business

followed up with trade financing business volume and international settlement amount hitting another record

high; its green financial services were constantly upgraded with brand impact being further expanded; the cash

management, small enterprise business and institutional business were steadily promoted with the foundation

being increasingly solid. On retail businesses, the scale of comprehensive financial assets in retail grew

rapidly; the development of its tour finance and pension finance kept a good momentum with expanding market

influence; the operation benefits in credit card business were obviously promoted, and both of development

and internal control management of private banking business were reinforced; and the construction of

community bank and “retail credit factory” was launched with good implementation and operation. In respect

22

to financial market businesses, the scale benefit of its bank-to-bank platform was increasingly notable with

further exploration of development space; the bond investment, fund trading and broking business maintained

steady development, further strengthening the service support to the whole bank; proactively carrying out the

supervisory and regulatory requirements, the asset management business also witnessed steady growth in

scale and significantly improved business compliance and stability level; the asset custody business varieties

was much more balance with swiftly developing scale, thus ranking forefront among other bank peers; and the

futures custody business was also successfully started.

(3) New progress was made in improving management, operations and support capability. The resource

allocation with combination of centralization and decentralization and matrix management, the evaluation, the

risk & compliance and the human resource management system were constantly improved. Sticking to capital

intensity orientation, improving its evaluation and resource allocation management, establishing and improving

a new liquidity management system, properly dealing with the fluctuation of market liquidity, accelerating the

establishment of a refined interest rate pricing system, actively coping with the challenges from interest rate

liberalization, making clear the unified credit principle, implementing general risk control requirements, focusing

on strengthening emerging business risk management, improving risk classification, reinforcing monitoring

analysis, improving authorization and credit granting policy, enhancing the examination and disposal of risks

and ensuring overall stability of asset quality, and thus promoting the integration of the compliance, internal

control and operating risk, reinforcing audit supervision and completing the accountability system.

Safeguards for operational support were reinforced. Lanzhou Branch started operation during the reporting

period, and the total number of institutions of the Company reached 826. Successfully upgraded E-banking

functions, providing WeChat bank and “E-family Fortune” service, upgraded the client side of mobile phone

banking, and expanded the telephone banking system. Moreover, the Company further optimized the payment

and settlement management system, steadily promoted the accounting internal control and operation service

level and made solid progress in the building of professional ability in information technology, accomplishing

the removal of the machine room for same-city disaster recovery at Waigaoqiao, Shanghai and putting into

operation, and initiating the construction of machine room and ring network in Chengdu.

(4) The Company’s market position and brand image were steadily improved. The Company successfully

ranked among the Top 50 World Banks (listing by The Banker magazine of UK), the top 500 enterprises of the

world (listing by Fortune magazine of USA) and the top 200 listed companies of the world (listing by Forbes

magazine of USA). Meanwhile, the Company received numerous awards granted by various authoritative

organizations at home and abroad, including the “Asian Bank Offering the Greatest Return to Shareholders

2013”, the “Award of the Best Commercial Bank Performing Social Responsibilities”, the “Award of the Most

Innovative Bank” and the “Award of the Best Green Bank”.

2. Composition of operating income and operating profit

During the reporting period, operating income of the Company was RMB109.287 billion, and its operating

profit was RMB54.078 billion.

(1) The Company divided its regional branches into ten segments by importance and comparability,

namely, head office (including the headquarters and its affiliated operating units), Fujian, Beijing, Shanghai,

Guangdong, Zhejiang, Jiangsu, Northeast and other regions in Northern China, Western China and Central

China. Operating income and operating profit of various regions were as follows:

23

Unit: RMB million

Region Operating incomeChange over

previous year (%)Operating profit

Change overprevious year (%)

Head office 15,718 67.62 (1,860)Negative in the

same periodof the last year

Fujian 14,313 24.48 8,935 22.89

Beijing 7,346 28.45 5,127 27.82

Shanghai 7,448 21.52 4,719 14.65

Guangdong 10,034 11.11 6,149 14.51

Zhejiang 5,069 7.10 655 (67.53)

Jiangsu 6,150 28.55 3,820 23.54

Northeast and other regions in Northern China

14,200 14.12 8,428 10.42

Western China 14,342 24.23 9,638 24.51

Central China 14,667 18.67 8,467 10.16

total 109,287 24.73 54,078 17.39

(2) The amount, proportion and year-on-year changes of the items of operating income

Unit: RMB million

Item AmountPercentage in

total operating income (%)Year-on-year change (%)

Interest income from loans 82,505 38.55 10.41

Interest income from placements 6,998 3.27 (45.60)

Interest income from amount due from the Central Bank

5,831 2.72 28.66

Interest income from amount due from banks and other financial institutions

6,086 2.84 13.35

Interest income from financial assets held under resale agreements

50,231 23.47 23.01

Gain and loss, and interest income from investment

34,716 16.22 138.73

Fee and commission income 24,736 11.56 57.75

Interest income from financing lease 3,228 1.51 27.99

Other income (313) (0.14) (137.22)

total 214,018 100 24.49

24

3. Financial position and operating results

(1) Changes of key financial indicators and descriptions

Unit: RMB million

ItemDecember

31, 2013December

31, 2012

Change overprevious

year-end (%)Brief description

Total assets 3,677,435 3,250,975 13.12Steady and healthy growth of various asset businesses

Total liabilities 3,476,264 3,080,340 12.85Steady and healthy growth of various liability businesses, and steady growth of customer deposit and other core liabilities

Shareholders’ equity attributable to the shareholders of the parent company

199,769 169,577 17.80 Transfer of the net profit earned in the current period

Item 2013 2012Change over

previousyear (%)

Brief description

Net profit attributable to the shareholders of the parent company

41,211 34,718 18.70

Stabilized interest margin, leading to fast growth in interest-bearing assets; rapid growth of fee and commission income; and cost-to-income ratio maintained at a low level

Weighted average ROE (%)

22.39 26.65Down 4.26 percentage

points

The Company implemented non-public offering at the end of 2012 and raised the capital of RMB23.532 billion which was taken into the weighted average ROE for calculation from January 2013, and thus the year-on-year increase of weighted average net assets in 2013 was higher than the year-on-year net profit increase, and the weighted average net assets ROE decreased.

Net cash flow from operating activities

209,119 116,701 79.19Steady growth of various businesses and increase of investment allocation by seizing market opportunity

25

(2) Main items with changes over 30% in the accounting statement

Unit: RMB million

Main accounting itemDecember

31, 2013December

31, 2012

Change overprevious

year-end (%)Brief description

Amount due from banks and other financial institutions

62,845 164,642 (61.83)

Adjustment of assets allocation in banks and other financial institutions, leading to decrease of the balance of amount due from banks and other financial institutions

Placements with banks and other financial institutions

87,091 214,812 (59.46)

Adjustment of assets allocation in banks and other financial institutions and decrease of the application of low-profit assets, leading to decrease of the balance of placements with banks and other financial institutions

Held-for-trading financial assets

42,295 21,540 96.36Increase of held-for-trading corporate bonds

Available-for-sale financial assets

263,681 192,057 37.29

Increase of available-for-sale government bonds and increase of fund trust and other investments on the premise of keeping credit risk under control, leading to the increase of return on investment

Held-to-maturity investment 117,655 69,199 70.02Increase of held-to-maturity government bonds

Investment in accounts receivable

328,628 111,360 195.10

Increase of fund t rust and other investments on the premise of keeping credit risk under control, leading to the increase of return on investment

Financial leasing receivable 46,094 33,779 36.46Growth of financial leasing business of the subsidiary Industrial Leasing

Financial assets sold under repurchase agreements

81,781 161,862 (49.47)

Flex ib ly organ ized var ious fund sources from banks and other financial inst i tut ions as required for asset allocation, leading to the decrease of financial assets sold under repurchase agreements compared with that at the beginning of the year

Interest payable 26,317 18,895 39.28 Growth of interest payable for deposits

Share capital 19,052 12,702 50.00Implemente d the profit distribution plan 2012 and distributed 5 bonus shares for every 10 shares

Surplus reserve 9,824 6,648 47.77Appropriation of statutory surplus reserve as per 50% of the share capital

Undistributed profit 93,326 71,283 30.92Transfer of the net profit earned in the current year

26

Main accounting item 2013 2012Change over

previous year (%)Brief description

Fee and commission income 24,736 15,681 57.75Rapid growth of intermediate business income

Fee and commission expense 974 734 32.70 Growth of fee and commission expense

Gain (loss) from investment 22 (346)Negative in the

same periodof the last year

Being highly interrelated, the overall losses of these three i tems after consolidation was RMB376 million, mainly because of the rise of market interest rate, the constant decrease of bond market price and the year-on-year decrease of held-for-trading bond related gain and loss during the reporting period

Gain (loss) from changes in fair value

(1,142) 339 (436.87)

Gain from exchange 744 439 69.48

Business tax and surcharges 7,831 5,748 36.24 Growth of taxable income

Impairment loss of assets 18,188 12,382 46.89 Growth of impairment loss of loans

(II) Analysis of balance sheet

1. Assets

As at the end of the reporting period, the total assets of the Company stood at RMB3,677.435 billion, up

13.12% from the beginning of the period. Of which, loans increased by RMB127.892 billion or 10.40% from the

beginning of the period; financial assets held under resale agreements increased by RMB128.293 billion or

16.18% compared with the beginning of the period; and various net investments were up RMB358.291 billion

or 90.56% compared with the beginning of the period.

the details of loans were as follows:

(1) Classification of loans

Unit: RMB million

Type December 31, 2013 December 31, 2012

Corporate loans 988,808 912,187

Personal loans 353,644 299,936

Discounted bills 14,605 17,042

total 1,357,057 1,229,165

As at the end of the reporting period, the proportion of corporate loans was 72.85%, down 1.36 percentage

points from the beginning of the period. The proportion of personal loans increased by 1.68 percentage points

to 26.07%, and the proportion of discounted bills decreased by 0.31 percentage point to 1.08%, compared

with the beginning of the period. During the reporting period, the Company recognized accurately on changes

in the economic situation and the direction of regulatory policy regulation, emphasized the alignment with the

industrial policies centering on serving real economy, reasonably defined the distribution, direction and pace of

credits, and maintained the rapid and balanced development of key businesses.

27

(2) Loan distribution by industry

As at the end of the reporting period, the top five industries that received the largest proportion of bank loans

were: personal loans, manufacturing, wholesale and retail, real estate and leasing & commercial services. The

detailed distribution by industry was as follows:

Unit: RMB million

Industry

December 31, 2013 December 31, 2012

Loan balance

Percentage (%)

NPL ratio (%)

Loan balance

Percentage (%)

NPL ratio (%)

Agriculture, forestry, husbandry and fishery

5,401 0.40 0.00 3,565 0.29 0.00

Mining 46,146 3.40 0.67 50,974 4.15 0.02

Manufacturing 281,108 20.71 1.34 261,458 21.27 0.62

Production and supply of power, heat, gas and water

41,048 3.02 0.04 40,676 3.31 0.07

Construction 64,362 4.74 0.13 50,385 4.10 0.29

Transportation, logistics and postal service

47,608 3.51 0.45 55,524 4.52 0.02

Information transmission, software and IT service

6,818 0.50 0.66 8,854 0.72 2.36

Wholesale and retail 203,774 15.02 1.76 165,785 13.49 1.09

Accommodation and catering 6,599 0.49 0.09 6,605 0.54 0.02

Finance 1,476 0.11 0.02 2,066 0.17 0.24

Real estate 131,253 9.67 0.00 110,649 9.00 0.06

Leasing and commercial services

83,125 6.13 0.27 81,371 6.62 0.39

Scientific research and technical service

5,839 0.43 0.00 4,451 0.36 0.01

Water conservation, environment and public facility administration

50,527 3.72 0.21 55,106 4.48 0.09

Residential services, repair and other related services

1,961 0.14 0.61 1,735 0.14 2.13

Education 467 0.03 0.43 446 0.04 0.45

Sanitation and social services

3,000 0.22 0.00 2,516 0.20 0.00

Culture, sporting and entertainment

3,097 0.23 0.05 2,948 0.24 0.02

Public administration, social security and social organization activities

5,199 0.38 0.00 7,073 0.58 0.00

Personal loans 353,644 26.07 0.55 299,936 24.39 0.32

Discounted bills 14,605 1.08 0.00 17,042 1.39 0.00

total 1,357,057 100 0.76 1,229,165 100 0.43

28

During the reporting period, the Company recognized accurately on changes in the economic situation and the

direction of regulatory policy regulation and reasonably arranged the distribution emphasis and pace of credits

while having effective risk control, and thus the loan industry structure was further optimized and the layout

was much more reasonable. The Company also reinforced the support to less cyclical industry and domestic

livelihood consumption industry, further improved green financial credit services, gave priority to economic

restructure, industrial structure upgrading and technical innovation projects with energy conservation and

emission reduction within the planning scope of the state and accelerated the development of medium and

small enterprises and retail businesses to lower the service “emphasis”.

While further intensifying the prospective analysis, study and judgment of industrial risks, the Company

set stringent qualification criteria for clients, reinforced risk early warning, examination and recovery and

effectively controlled industrial risks. There were slight increases in NPL ratios from the beginning of the year

in the “manufacturing” and “wholesale & retail”, mainly because these two industries were subject to relatively

large impacts of the slowdown of economic growth and the adjustment of industrial structure, and included

more medium and small-sized private enterprises.

(3) Loan distribution by geographical region

Unit: RMB million

RegionDecember 31, 2013 December 31, 2012

Loan balance Percentage (%) Loan balance Percentage (%)

Head office 73,771 5.44 53,740 4.37

Fujian 200,481 14.77 181,543 14.77

Guangdong 150,069 11.06 132,172 10.75

Zhejiang 98,728 7.28 93,723 7.63

Shanghai 91,640 6.75 89,420 7.28

Beijing 88,455 6.52 72,552 5.90

Jiangsu 73,682 5.43 66,274 5.39

Northeast and other regions in Northern China

170,702 12.58 167,939 13.66

Western China 188,667 13.90 167,235 13.61

Central China 220,862 16.27 204,567 16.64

total 1,357,057 100 1,229,165 100

The Company’s loans remained stable in terms of geographical distribution and were located primarily in

developed regions such as Fujian, Guangdong, Zhejiang, Shanghai, Beijing and Jiangsu. While following the

unified credit policy and orientation, the Company actively adjusted and optimized the regional credit structure,

sufficiently considered factors like regional resources conditions, market environment, credit environment and

risk management and control abilities of its branches, and implemented differentiated credit business policies

for featured industries and high quality customers that had salient competitive advantages. By effectively

playing its role as a financial service provider, the Company promoted the reasonable distribution and steady

development of credit business in various regions.

29

(4) Forms of loan guarantee

Unit: RMB million

Security typeDecember 31, 2013 December 31, 2012

Loan balance Percentage (%) Loan balance Percentage (%)

Unsecured loans 255,792 18.85 231,063 18.80

Guaranteed loans 305,317 22.50 276,693 22.51

Secured by mortgage 600,367 44.24 531,556 43.24

Secured by collaterals 180,976 13.33 172,811 14.06

Discounted bills 14,605 1.08 17,042 1.39

total 1,357,057 100 1,229,165 100

During the reporting period, the Company stressed more on the application of mortgages and collaterals as

an important instrument to mitigate customers’ credit risks. The proportion of loans secured by mortgage and

collaterals was up 0.27 percentage point at the end of the period.

(5) Loans granted to the top ten borrowers

Unit: RMB million

Customer December 31, 2013 Percentage (%) in total loans

Customer A 16,740 1.23

Customer B 5,548 0.41

Customer C 5,430 0.40

Customer D 5,300 0.39

Customer E 4,753 0.35

Customer F 4,351 0.32

Customer G 4,262 0.31

Customer H 3,799 0.28

Customer I 3,052 0.22

Customer J 3,033 0.22

total 56,268 4.15

As at the end of the reporting period, the loan balance of the Company’s largest single borrower was

RMB16.74 billion, accounting for 7.06% of the Company’s net capital, which conformed to the requirement by

the regulatory departments that the proportion of loan balance of a single borrower could not exceed 10% of a

bank’s net capital.

30

(6) Structure of personal loans

Unit: RMB million

Item

December 31, 2013 December 31, 2012

Loanbalance

Percentage (%)

NPL ratio (%)

Loan balance

Percentage (%)

NPL ratio (%)

Personal residential and business mortgage loans

185,061 52.33 0.21 172,943 57.66 0.15

Personal business loans 73,483 20.78 0.59 69,832 23.28 0.42

Credit cards 60,375 17.07 1.82 40,354 13.46 0.91

Others 34,725 9.82 0.09 16,807 5.60 0.16

total 353,644 100 0.55 299,936 100 0.32

During the reporting period, the Company took the initiative to adjust and optimize its structure of personal

loans and supported the development of real economy. The percentage of personal residential and business

mortgage loans further dropped, and personal businesses like credit cards and other loans grew at a relatively

higher speed, leading to a more reasonable structure of personal loans. Influenced by the slowdown of growth

of domestic economy and adjustment of retail business strategy of the Company, the NPL ratio of personal

loans slightly went up at the end of the reporting period, but it still remained at a relatively low level.

The Company further intensified the risk prevention, management and control of personal loans. Firstly, it

continued to propel the construction of “retail credit factory”, consolidated the centralization, standardization

and process management of personal loans and realized steady business development with controllable risks.

Secondly, it reinforced the verification of the authenticity of the identity of the borrower and the intended use

of the loan to monitor and control application of personal loans. Thirdly, it stressed the risk management and

control of key personal loans like personal business loans by setting stringent customer access and reinforcing

the management of duration. Fourthly, it strengthened the examination of risks, gave timely risk alert, and

accelerated risk elimination and disposal.

The details of investment were as follows:

(1) Analysis of total investment

As at the end of the reporting period, the net investment of the Company stood at RMB753.941 billion, up

RMB358.291 billion or 90.56% from the beginning of the period. The specific composition of investment was

as follows:

① Classification based on accounting item

Unit: RMB million

ItemDecember 31, 2013 December 31, 2012

Balance Percentage (%) Balance Percentage (%)

Held-for-trading 42,295 5.61 21,540 5.44

Available-for-sale 263,681 34.97 192,057 48.54

Receivable 328,628 43.59 111,360 28.15

Held-to-maturity 117,655 15.61 69,199 17.49

Long-term equity investments 1,682 0.22 1,494 0.38

total 753,941 100 395,650 100

31

During the reporting period, as the size of assets went up, the Company increased investment scale,

particularly investments that had relatively high absolute yields and controllable risks. As at the end of

the reporting period, the balance of investments in accounts receivable witnessed large increase over the

beginning of the period, mainly because the investments on trust and other beneficial rights increased greatly

over the beginning of the period. Since the held-for-trading, available-for-sale and held-to-maturity investments

primarily were bond investments and the bond yield gradually went up in 2013, the Company seized the

market opportunity and appropriately increased the holding of held-to-maturity and available-for-sale bond

investments, leading to the fast growth of bond investment scale at the end of the reporting period.

② Classification based on issuer

Unit: RMB million

Asset TypeDecember 31, 2013 December 31, 2012

Balance Percentage (%) Balance Percentage (%)

Government bonds 138,969 18.43 62,107 15.70

Central bank bills and financial bonds

72,565 9.62 68,630 17.35

Corporate bonds 158,999 21.09 122,040 30.85

Other investments 381,726 50.63 141,379 35.72

Long-term equity investments

1,682 0.22 1,494 0.38

total 753,941 100 395,650 100

In terms of classification and analysis based on issuer, during the reporting period, increase of the Company’s

investment scale mainly rested with other investments since the Company increased the trust and other

beneficial right investments to improve the return on investment while ensuring credit risks controllable.

In respect of bonds, the Company stressed on the increase of holding of government bonds and local

government bonds with tax deduction and exemption, risk capital saving and high liquidity, and properly

increased holding of corporate bonds with good qualifications and relatively high yields, improving the yields of

its investment portfolios.

(2) Long-term equity investments

As at the end of the reporting period, the book value of the Company’s long-term equity investments was

RMB1.682 billion, and the details thereof were as follows:

① The Company held 14.72% equity in Jiujiang City Commercial Bank Co., Ltd. (hereinafter referred to as

“Bank of Jiujiang”) with a book value of RMB1.274 billion. In 2008, the Company acquired 102.20 million

shares of Bank of Jiujiang at the price of RMB2.9 per share, accounting for 20% of the total share capital of

Bank of Jiujiang. In 2009, Bank of Jiujiang increased 4 shares for every 10 shares to all recorded shareholders

by utilizing capital reserves, and as a result, the Company held 143.08 million shares of Bank of Jiujiang.

In 2010, Bank of Jiujiang increased its registered capital by RMB400.66 million, which was offered privately

at the price of RMB3.3 per share, and the Company subscribed for 80.12 million shares. Consequently the

Company held 223.20 million shares and the proportion of equity interest remained 20% of the total share

capital of Bank of Jiujiang. In December 2011, Bank of Jiujiang increased its registered capital by RMB400

million. The Company did not subscribe and the proportion of the equity interest of the Company in Bank of

Jiujiang was diluted to 14.72%.

32

② The Company held 62.50 million shares of China UnionPay Co., Ltd. (hereinafter referred to as “China

UnionPay”) with a proportion of equity interest of 2.13% and a book value of RMB81 million. The Company

became a shareholder of China UnionPay after purchasing 50 million shares at the price of RMB1 per share

based on the Document YF [2001] No. 234 issued by the PBOC. The Company subscribed for 12.50 million

shares of China UnionPay at the price of RMB2.5 per share based on the Document YJF [2008] No. 202

issued by CBRC on May 23, 2008.

③ Industrial Trust held 4.35% equity in Huafu Securities Co., Ltd. with a book value of RMB180 million.

④ Industrial Trust held 5.00% equity in Zijin Mining Group Financial Co., Ltd. with a book value of RMB25

million.

⑤ Industrial Trust held 19.00% equity in Chongqing Machinery and Electronics Holding Group Finance

Company Limited with a book value of RMB122 million.

(3) The Company’s equity in other listed companies

① Details of the Bank’s equity in other listed companies:

Unit: RMB million

Name of the company

Initial investment

costs

Number ofshares held

(shares)

Percentagein the company’s

equity (%)

Book value at theend of the reporting

period

VISA INC - 10,866 - 15

total - - - 15

Note: during the reporting period, the Company had sold its 939,176 shares in CCS Supply Chain Management Co., Ltd.

② As at the end of the reporting period, Industrial Trust held shares in listed companies with a total book value

of RMB30.5693 million, and the transactions of which were normal investment business.

(4) The Company’s equity in non-listed financial companies and the companies planning to be listed

Unit: RMB million

Name of the companyInitial

investment costs

Number ofshares held

(shares)

Percentagein the company’s

equity (%)

Book value at theend of the reporting

period

Jiujiang City Commercial Bank Co., Ltd.

561 223,200,000 14.72 1,274

Huafu Securities Co., Ltd. 180 - 4.35 180

Zijin Mining Group Financial Co., Ltd. 25 - 5.00 25

Chongqing Machinery and Electronics Holding Group Finance Company Limited

114 - 19.00 122

total 880 - - 1,601

Note: the shares of Huafu Securities Co., Ltd., Zijin Mining Group Financial Co., Ltd. and Chongqing Machinery and Electronics

Holding Group Finance Company Limited set out above were held by Industrial Trust.

33

(5) Use of raised proceeds and changes in scheduled projects

On December 31, 2012, approved by CSRC, the Company offered 1,915,146,700 A Shares in total to The

People’s Insurance Company (Group) of China Limited, PICC Property and Casualty Company Limited, PICC

Life Insurance Company Limited, China National Tobacco Corporation and Shanghai Zheng Yang International

Business Co., Ltd. As of December 31, 2012, the subscription payment and verification for the Non-public

Offering were completed, and the net proceeds raised after deduction of offering expenses were RMB23.532

billion, all of which was used to supplement the Company’s capital. The registration and custody process for

the newly offered shares was completed in the Shanghai Branch of China Securities Depository and Clearing

Corporation Limited on January 7, 2013.

During the reporting period, the Company did not change the use of the proceeds raised.

Financial assets held under resale agreements:

As at the end of the reporting period, the Company’s financial assets held under resale agreements were

RMB921.090 billion, an increase of RMB128.293 billion or 16.18% from the beginning of the period, mainly

because the Company flexibly allocated assets and exploited the capital sources to increase the income from

non-credit businesses and the business scale of financial assets held under resale agreements maintained

stable growth.

Unit: RMB million

Asset Type December 31, 2013 December 31, 2012

Balance Percentage (%) Balance Percentage (%)

Bonds 12,846 1.39 23,265 2.93

Bills 352,626 38.28 370,452 46.73

Trust and other beneficial rights 554,016 60.15 394,715 49.79

Credit assets 700 0.08 3,291 0.42

Lease payment receivable 902 0.10 1,074 0.14

total 921,090 100 792,797 100

34

2. Liabilities

As at the end of the reporting period, the total liabilities of the Company stood at RMB3,476.264 billion, an

increase of RMB395.924 billion or 12.85% from the beginning of the period.

The specific composition of customer deposits was as follows:

As at the end of the reporting period, the balance of customer deposits was RMB2,170.345 billion, an increase

of RMB357.079 billion or 19.69% compared with the beginning of the period.

Unit: RMB million

ItemDecember 31, 2013 December 31, 2012

Amount Percentage (%) Amount Percentage (%)

Demand deposits 907,078 41.79 748,299 41.27

Incl: Corporate 721,121 33.23 599,305 33.05

Personal 185,957 8.57 148,994 8.22

Time deposits 979,043 45.11 820,468 45.25

Incl: Corporate 811,637 37.40 670,317 36.97

Personal 167,406 7.71 150,151 8.28

Other deposits 284,224 13.10 244,499 13.48

total 2,170,345 100 1,813,266 100

The deposits from banks and other financial institutions were as follows:

As at the end of the reporting period, the Company had a balance of RMB1,007.544 billion in deposits from

banks and other financial institutions, an increase of RMB113.108 billion or 12.65% from the beginning of

the period. The primary reason was that the Company attracted deposits from bank peers based on assets

allocation.

Unit: RMB million

Transaction counterpartDecember 31, 2013 December 31, 2012

Balance Percentage (%) Balance Percentage (%)

Deposits from bank peers 597,583 59.31 670,470 74.96

Deposits from other financial institutions

409,961 40.69 223,966 25.04

total 1,007,544 100 894,436 100

35

Details of financial assets sold under repurchase agreements were as follows:

As at the end of the reporting period, the Company recorded a balance of RMB81.781 billion in financial assets

sold under repurchase agreements, representing a decrease of RMB80.081 billion or 49.47% compared with

the beginning of the period.

Unit: RMB million

TypeDecember 31, 2013 December 31, 2012

Balance Percentage (%) Balance Percentage (%)

Bonds 53,170 65.02 102,488 63.32

Bills 18,729 22.90 47,398 29.28

Others 9,882 12.08 11,976 7.40

total 81,781 100 161,862 100

(III) Analysis of income statement

During the reporting period, the Company witnessed a steady and healthy growth in various businesses,

with the interest-bearing assets growing rapidly. The Company flexibly allocated assets by capturing market

opportunities and increased the yields of interest-bearing assets, with the net interest margin decreasing by

only 21 basis points year-on-year and the quarterly net interest margin gradually being stabilized. The fee

and commission income also experienced a fast growth while the cost-to-income ratio was maintained at a

relatively low level. The net profit attributable to the shareholders of the parent company reached RMB41.211

billion, up 18.70% year-on-year.

Unit: RMB million

Item 2013 2012

Operating income 109,287 87,619

Net interest income 85,845 72,193

Net non-interest income 23,442 15,426

Business tax and surcharges （7,831) (5,748)

Operating and administrative expense (28,757) (22,877)

Impairment loss of assets (18,188) (12,382)

Other operating costs (433) (544)

Net non-operating income and expense 183 125

Profit before tax 54,261 46,193

Income tax (12,750) (11,266)

Net profit 41,511 34,927

Profit and loss of minority shareholders 300 209

Net profit attributable to the shareholders of the parent company 41,211 34,718

36

1. Net interest income

During the reporting period, the net interest income of the Company was RMB85.845 billion, up RMB13.652

billion or 18.91% year-on-year, mainly because that various businesses of the Company grew steadily and

rapidly, and the daily average scale of interest-bearing assets increased by 29.24% year-on-year, offsetting

influence of the drop of 21 basis points in net interest margin.

The composition of interest income and interest expense during the period was as follows:

Unit: RMB million

Item

2013 2012

AmountPercentage

(%)Amount

Percentage (%)

Interest income

Interest income from corporate and personal loans 80,938 42.69 71,905 46.16

Interest income from discounted bills 1,567 0.83 2,822 1.81

Interest income from investments 34,694 18.30 14,888 9.56

Interest income from the amount due from the Central Bank

5,831 3.08 4,532 2.91

Interest income from placements with banks and other financial institutions

6,998 3.69 12,865 8.26

Interest income from resale agreements 50,231 26.49 40,836 26.22

Interest income from deposits in banks and other financial institutions

6,086 3.21 5,369 3.45

Interest income from financial leasing 3,228 1.70 2,522 1.62

Other interest income 29 0.01 16 0.01

Subtotal of interest income 189,602 100 155,755 100

Interest expense

Interest expense on deposits 44,209 42.61 33,662 40.28

Interest expense on bonds issuance 3,100 2.99 3,283 3.93

Interest expense on deposits from banks and other financial institutions

47,367 45.65 35,997 43.08

Interest expense on placements from banks and other financial institutions

2,718 2.62 2,066 2.47

Interest expense on repurchase agreements 5,537 5.34 7,801 9.34

Other interest expenses 826 0.79 753 0.90

Subtotal of interest expense 103,757 100 83,562 100

net interest income 85,845 　 72,193

37

Unit: RMB million

Item

2013 2012

Average balance

Average yield (%)

Average balance

Average yield (%)

Interest-bearing assets

Corporate and personal loans and advances 1,338,119 6.17 1,086,408 6.86

Based on loan type:

Corporate loans 1,059,182 5.87 844,657 6.75

Personal loans 278,937 7.31 241,751 7.24

Based on loan term:

General short-term loans 733,779 5.96 489,480 7.08

Medium and long-term loans 578,282 6.44 558,174 6.64

Discounted bills 26,058 6.01 38,754 7.26

Investments 581,618 5.97 292,457 5.08

Deposits in the Central Bank 390,326 1.49 302,849 1.49

Deposits in and placements with banks and other financial institutions (including financial assets held under resale agreements)

1,158,370 5.47 1,006,565 5.85

Financial leasing 47,353 6.82 32,000 7.86

total 3,515,786 5.39 2,720,279 5.71

Item

2013 2012

Average balance

Average cost ratio (%)

Average balance

Average cost ratio (%)

Interest-bearing liabilities

Deposit taking 2,020,058 2.19 1,481,304 2.27

Corporate deposits 1,711,050 2.21 1,239,824 2.31

Demand deposits 690,271 0.64 524,251 0.74

Time deposits 1,020,779 3.28 715,573 3.47

Personal deposits 309,008 2.04 241,480 2.02

Demand deposits 137,471 0.38 106,151 0.41

Time deposits 171,537 3.37 135,329 3.29

Deposits in and placements from banks and other financial institutions (including financial assets sold under repurchase agreements)

1,199,166 4.71 1,011,429 4.61

Bonds payable 67,459 4.60 71,965 4.55

total 3,286,683 3.16 2,564,698 3.25

net interest spread - 2.23 - 2.46

net interest margin - 2.44 - 2.65

38

2. Net non-interest income

During the reporting period, the net non-interest income of the Company was RMB23.442 billion, accounting

for 21.45% of the operating income, an increase of RMB8.016 billion or 51.96% year-on-year. The specific

composition of net non-interest income was as follows:

Unit: RMB million

Item 2013 2012

Net fee and commission income 23,762 14,947

Gain and loss from investment 22 (346)

Gain and loss from changes in fair value (1,142) 339

Gain and loss from exchange 744 439

Income from other businesses 56 47

total 23,442 15,426

During the reporting period, the Company realized fee and commission income of RMB24.736 billion, up

RMB9.055 billion or 57.75% year-on-year. These items like gain and loss from investment, gain and loss from

changes in fair value and gain and loss from exchange were highly interrelated. After re-classifying them

based on the business nature, it was confirmed that the Company realized total losses of RMB376 million

during the reporting period, mainly because of the rapid decline of domestic bond market price after slight rise

in the first half year and the year-on-year decrease of held-for-trading bond related gain and loss measured in

fair value during the reporting period. The specific composition of fee and commission income was as follows:

Unit: RMB million

Item2013 2012

Amount Percentage (%) Amount Percentage (%)

Fee and commission income

Fee income from payment and settlement 517 2.09 474 3.02

Fee income from bank cards 4,742 19.17 2,497 15.93

Fee income from agency business 2,724 11.01 1,832 11.68

Fee income from guarantee commitment 1,111 4.49 1,343 8.56

Fee income from trading business 105 0.42 127 0.81

Fee income from custody business 3,357 13.57 1,494 9.53

Fee income from consulting service 9,642 38.98 6,046 38.56

Fee income from trust business 1,630 6.59 1,090 6.95

Fee income from lease business 384 1.55 264 1.68

Other fee income 524 2.12 514 3.28

Subtotal 24,736 100 15,681 100

Fee and commission expense 974 　 734

net fee and commission income 23,762 　 14,947

39

3. Operating and administrative expense

During the reporting period, the operating expense of the Company was RMB28.757 billion, up RMB5.880

billion or 25.70% compared with last year. The specific composition was as follows:

Unit: RMB million

Item 2013 2012

Amount Percentage (%) Amount Percentage (%)

Accrued payroll 17,304 60.17 13,404 58.59

Depreciation and amortization 1,404 4.88 1,230 5.38

Lease expense 1,885 6.55 1,469 6.42

Other general and administrative expenses 8,164 28.40 6,774 29.61

total 28,757 100 22,877 100

During the reporting period, in order to satisfy the needs for business development and organization

expansion, operating expense increased accordingly. In the same period, the operating income increased by

24.73% year-on-year, and the cost-income ratio dropped by 0.02 percentage point year-on-year, maintaining

at a low level of 26.71% and indicating reasonable control on expenses.

4. Impairment loss of assets

During the reporting period, the Company’s impairment loss of assets was RMB18.188 billion, up RMB5.806

billion or 46.89% year-on-year. The specific composition of impairment loss of assets was as follows:

Unit: RMB million

Item 2013 2012

Amount Percentage (%) Amount Percentage (%)

Impairment loss of loans 16,417 90.26 11,758 94.96

Impairment loss on investment in accounts receivable

1,221 6.71 76 0.61

Impairment loss on available- for-sale financial assets

- - 8 0.06

Impairment loss on financial leasing receivable

516 2.84 400 3.23

Impairment loss on other assets 34 0.19 140 1.14

total 18,188 100 12,382 100

During the reporting period, the Company accrued a loan impairment loss of RMB16.417 billion, up RMB4.659

billion year-on-year, mainly because: firstly, there was an increase in loans and the Company made provision

for impairment based on the predicted present value of future cash flow determined as per the original actual

loan interest rate, according to relevant provisions in the Accounting Standards for Enterprises and industrial

risks; and secondly, according to the Guiding Opinions of China Banking Regulatory Commission on the

Implementation of the New Regulatory Standards in China’s Banking Sector and other documents, in order

to meet the regulatory requirement of the 2.5% provision-to-loan ratio by 2016, the Company increased the

provision for impairment loss of loans considering such factors as the net profit and capital adequacy ratio of

the current period, further reinforcing its capability in resisting risks.

40

5. Income tax

During the reporting period, the effective income tax rate applying to the Company was 23.50%. The difference

between income tax expense and the amount calculated according to the 25% statutory tax rate was as

follows:

Unit: RMB million

Item 2013

Profit before tax 54,261

Statutory tax rate (%) 25

Income tax calculated at statutory tax rate 13,565

Effect on tax due to adjustment on the following items:

Tax-exempt income (1,115)

Non-deductible items 255

Adjustment on the tax of previous years 45

Income tax expense 12,750

(IV) Problems and difficulties in operation and countermeasures during the reporting period

While keeping steady and rapid development, the Company also encountered some difficulties, mainly being:

1. The macro-economic situation was much more complex. In 2013, the macro economy presented such

characteristics as “slow pace, soft recovery and possible repetition” with increasingly intensified economic

structural adjustment, and the de-productivity, de-stocking and de-leveraging of enterprises would go through

a rather long time, which brought about severe challenges to business operation of banks, especially the

adjustment of asset structure, the direction control of asset increment and the control of asset quality.

2. The monetary policy keynote turned to be sound and neutral and the financial regulation was more

stringent. Fitting with the structural adjustment, the macro-control policy, including the monetary policy, would

turn from the stimulus and loose keynote several years ago into the sound and neutral keynote, promoting the

de-leveraging of financial enterprises and de-productivity of entities. Reflecting in the monetary market, the

liquidity fluctuation aggravated and the prediction of tight liquidity was formed among financial institutions. In

the meantime, new capital management measures were implemented from 2013 and the financial regulation

tended to be more stringent.

3. The reform of the financial market was continuously accelerated. In respect of financial reform, the pace

of interest rate liberalization, financing diversification, multi-level financial market system construction and

lowering access for financial institutions were further accelerated, which resulted in new challenges to

operation management of banks.

Specific to the problems and difficulties set forth above, the entire Company took the initiative to carry out

the state macro economic policies and financial regulatory requirements, continued to reform and innovate,

maintained prudent operation, successfully withstood the challenges from the downward pressure of economy,

risk concentration and exposure in some regions and some industries, and drastic fluctuation of market

liquidity and interest rate, etc., and took the following main countermeasures:

1. Reasonably capturing situation changes and timely adjusting business strategies. While reasonably

capturing the macro-economic development trends and timely adjusting business strategies, the Company

41

also stressed on the benefit increase and capital saving, reinforced the analysis and research on changes

of monetary policy, market liquidity and regulatory requirements, paid close attention to the management

of liquidity and interest rate risks and strived to realize the harmony and unity of liquidity, security and

effectiveness.

2. Strengthening and perfecting professional operation system, and constantly promoting and deepening

operational transformation. The Company further established its specialized operation system focusing on

the three major businesses of corporate finance, retail finance and financial market, and constantly improved

its management mechanisms, especially the combination of centralization and decentralization and matrix

management for the planning & finance management mechanism, the risk & compliance mechanism, and

the human resource management mechanism. The sensitivity, scientificalness and effectiveness of business

planning, resource allocation, examination and evaluation, risk management and team building suitable to the

business specialization operation were continuously enhanced, with the group-oriented and comprehensive

operation management reaching a new level and the synergistic effect of business being further revealed.

3. Focusing on transformation development and market changes, the Company continuously improved

business management, and reinforced the liquidity risk management. While adhering to capital intensity

orientation, the Company also improved its evaluation and resource allocation management, established

and perfected a new liquidity management system, properly dealt with the fluctuation and impact of market

liquidity, accelerated the establishment of a refined interest rate pricing system and actively coped with

the challenges from interest rate liberalization. In addition, the Company explored the construction of a

comprehensive evaluation system for compliant operation, comprehensive internal control evaluation and risk

management of branches, thus guiding branches towards compliant, steady operation and intensifying the

risk management foundation. The Company also made clear the unified credit principle, implemented general

risk control requirements, focused on strengthening the risk management of emerging businesses, perfected

the institutional system, improved risk classification, made reasonable provisions and reinforced monitoring

analysis.

(V) Capital management

1. Capital management overview

During the reporting period, the Company earnestly carried out capital management policies according to

relevant provisions in the Capital Rules for Commercial Banks (Provisional) of CBRC, and worked out the

Standard Capital Adequacy Ratio Planning in the Transition Period from 2013 to 2018. In the light of the

2011-2015 Development Planning Outline of the Company, based on the business strategies, risk conditions

and regulatory requirements, it achieved the healthy, sustainable and steady development of all businesses,

and ensured that the capital adequacy ratio matched with the strategic development, risk preference and

risk management ability. During the reporting period, the Company had real time monitoring on the capital

adequacy and the application of capitals according to the new regulatory codes, with capital adequacy ratio

meeting the regulatory requirement.

Based on the principle of matching total available capital with the current and future business development

plan of the bank, the Company planned to issue no more than RMB 20 billion write-down qualified tier two

capital bonds in domestic and foreign markets according to the regulatory policies and market conditions,

which had been approved by the board of directors and the general meeting, and is now to be examined and

approved by the regulatory department.

In respect of internal management, the Company reinforced its capital allocation function by focusing on

the return on target risk assets and making overall arrangements on the risk-weighted asset scale of each

business department and business line so as to facilitate the optimal allocation of capital and strive to achieve

42

the maximum return on risk-weighted assets.

2. Implementation of the new capital accord

In respect of system building, the Company worked out the Administrative Measures for Verification of the

Advanced Method for Measurement of Credit Risk Capital and made clear the governance structure, scope,

process, method and application, and etc. for model verification of credit risks; set up a data governance

project team for new capital accord and had standard data sorting and data quality evaluation in risk field;

established a document management platform for new capital accord and carried out comprehensive collection

and sorting of new capital accord documents; strengthened the internal rating and personnel allocation of

branches and improved building of the internal rating system structure; and revised the Measures for Stress

Testing and further perfected the model system for stress testing.

In respect of project construction, the internal rating project of retail business and the internal model approach

project of market risk were developed, finished and put into operation; system development of the risk-

weighted asset (RWA) project of credit risks was completed to the test stage; the operating risk and “three

tasks management” integration was initiated; the independent verification and optimization of internal rating

model for non-retail customers was carried out; risk measurement instruments like customer limit, risk adjusted

return on capital (RAROC) and examination template of inventory credit asset risks were developed; the rating

model for regional risks was under research; and the stress testing model was improved.

In respect of management application, the Company further promoted the application of internal rating of

non-retail customers in such fields as industry limit, customer limit, authorization and credit granting, and

etc. and gradually propelled the application of customer limit and risk adjusted return on capital (RAROC) in

authorization and credit granting. Meanwhile, the Company also reinforced the application of stress testing

results in impairment testing and risk early warning.

43

3. Capital adequacy ratio

Unit: RMB million

Item December 31, 2013

Total capital 251,816

1. Core tier one capital 201,153

2. Other tier one capital -

3. Tier two capital 50,663

Capital deductions 1,633

1. Amount of deduction from core tier one capital 633

2. Amount of capital instruments mutually possessed by two or more than two commercial banks under agreement, or amount of capital investment taken by CBRC as watered capital that should be deducted from corresponding regulatory capital

-

3. The part of small amount minority capital investment of financial institutions not consolidated exceeding 10% of the core tier one net capital that should be deducted from corresponding regulatory capital

-

4. The part of large amount minority capital investment of financial institutions not consolidated exceeding 10% of the core tier one net capital that should be deducted from corresponding core tier one capital

-

5. The part of other tier one capital investment and tier two capital investment in large amount minority capital investment of financial institutions not consolidated that should be deducted from corresponding regulatory capital

1,000

6. The part of net deferred tax assets exceeding 10% of the core tier one net capital based on the future profit of commercial banks that was deducted from core tier one capital

-

7. The part of the total of large amount minority capital investment of financial institutions and corresponding net deferred tax assets exceeding 15% of the core tier one net capital that was not deducted from core tier one capital

-

Net capital 250,183

Minimum capital requirement 184,838

Reserve capital and counter-cyclical capital requirement 57,762

Additional capital requirement -

Core tier one capital adequacy ratio (before consolidation) (%) 8.39

Tier one capital adequacy ratio (before consolidation) (%) 8.39

Capital adequacy ratio (before consolidation) (%) 10.56

Core tier one capital adequacy ratio (after consolidation) (%) 8.68

Tier one capital adequacy ratio (after consolidation) (%) 8.68

Capital adequacy ratio (after consolidation) (%) 10.83

44

(1) The table above and data hereof were prepared in accordance with relevant requirements in the

Notice of China Banking Regulatory Commission on New CAR Reporting (YJF [2013] No. 53) (new capital

requirements), with the capital adequacy ratio, its calculation method and calculation range as follows:

CAR=total capital－ corresponding capital deductions

×100%

risk-weighted assets

Tier one CAR=tier one capital－ corresponding capital deductions

×100%

risk-weighted assets

Core tier one CAR=core tier one capital－ corresponding capital deductions

×100%

risk-weighted assets

Calculation range for consolidated capital adequacy ratio of the Company included Industrial Bank Co., Ltd. and

relevant financial institutions conforming to requirement on the calculation range of consolidated capital adequacy

ratio in Section I, Chapter II of the Capital Rules for Commercial Banks (Provisional), to be specific, being the bank

group jointly formed by Industrial Bank Co., Ltd., Industrial Leasing, Industrial Trust and CIB Fund Management.

(2) As at the end of the reporting period, under the off-site regulation reporting system of CBRC, the

Company’s total consolidated credit risk exposure was RMB4,175.866 billion; its total overdue loans stood

at RMB15.517 billion; its total NPLs was RMB10.577 billion; the balance of actual accrued provision for loan

impairment stood at RMB37.673 billion; the total market risk capital requirement was RMB1.188 billion; the

Company’s total operating risk capital requirement was RMB12.816 billion; and its book value of consolidated

equity investment was RMB10.304 billion.

For market risk measurement, the Company adopted the standard approach with market risk-weighted assets

being 12.5 times of the market risk capital requirement, and the market risk-weighted assets was RMB14.852

billion as at the end of the reporting period.

For operating risk measurement, the Company adopted the basic indicator approach with operating risk-

weighted assets being 12.5 times of the operating risk capital requirement, and the operating risk-weighted

assets was RMB160.204 billion as at the end of the reporting period.

(3) Being measured in accordance with the Administrative Measures for Capital Adequacy Ratios of

Commercial Banks (old capital requirements) of CBRC, as at the end of the reporting period, the Company’s

capital adequacy ratio and core capital adequacy ratio before consolidation were 11.64% and 9.08%

respectively, and its capital adequacy ratio and core capital adequacy ratio after consolidation were 11.92%

and 9.21% respectively.

4. On the basis of the Regulatory Requirements for Information Disclosure on Capital Composition of

Commercial Banks of CBRC, the Company further disclosed such information as the composition of capital,

the descriptions of relevant items and major characteristics of capital instruments in the current reporting

period. Please refer to the IR column at our website (www.cib.com.cn) for details.

(VI) Analysis of core competitiveness

The Company has established a modern corporate system in accordance with national conditions and bank

characteristics. As a product of the domestic financial reform, the Company always sticks to the marketization

direction, and has established an efficient and flexible modern bank operation and management system and

mechanism. From the earliest modern form of enterprise organization—joint stock system to breaking the “three

irons”, from consolidating and perfecting the system with unified legal person and multi-level operation by head

office and branches to explore and build a new operation system “integrating business sections and lines with matrix

45

management”, from the initial building of the management of assets and liabilities ratios, management of integrated

business plan, risk management, internal control management and other systems for modern commercial banks to

comprehensively carrying out process reengineering and system reconstruction, the Company has been constantly

self-denial and self-reforming, continuously deepening the reform of operation and management system, seizing the

high ground for modern bank competition and stimulating vigorous operation vitality.

The Company has sensitive market reaction, prospective strategic judgment and prominent innovation ability.

Over the last few years, the Company has been famous for its sharp market judgment and leading business

innovation. The Company is the first to innovate supplementary capital instruments like subordinated debts and

hybrid capital bonds, the first to open up the green financial market, the first to adopt the “Equator Principles”,

and the first to build an interbank cooperation and service platform, leading the industrial innovation in many

segmented business areas, developing its own “blue sea” and forming its distinctive business characteristics.

In 2004, the Company took the lead in carrying out strategic transformation of business development model

and profit model, and comprehensively accelerated the business line specialization reform in the recent

three years and built the matrix management system. The Company has always been able to capitalize

on the development and changes at home and abroad, make prospective strategic deployment and firmly

implement, thus seizing the major opportunities. The Company has currently become a major competitor in the

domestic financial field of urbanization, a leader in the green financial market and a forerunner in the interbank

cooperation and service area, while building up its relatively strong competitiveness in the relevant segmented

markets, a solid business and customer foundation and a good reputation in the market.

The Company has preliminarily built a comprehensive financial service group with banking as its main business.

The Company has been persisting in the multi-market, multi-product and comprehensive development path and

actively creating its capability of financial services for multi-market. It has formed a relatively complete business

system covering interbank business, capital trading, assets management and assets custody, and has taken

the lead in planning its business in the monetary market, capital market, bond market, interbank market, non-

bank financial institution market, precious metal, foreign exchange and derivative product trading. Continuously

exerting force on group-oriented and comprehensive operation and making new breakthroughs, the Company

has possessed the wholly-owned subsidiary—Industrial Bank Financial Leasing Co., Ltd. and the holding

subsidiaries—China Industrial International Trust Limited and CIB Fund Management Co., Ltd.; in addition,

China Industrial International Trust Limited has also established the wholly-owned subsidiary—China Industrial

Asset Management Limited, and CIB Fund Management Co., Ltd. has founded the wholly-owned subsidiary—

CIB Wealth Management Co., Ltd., leading to the basic forming of a comprehensive financial service group with

banking as its main business and covering trust, leasing, fund and asset management.

The Company is supported by an advanced and strong operating system. The Company is one of the

first banks established in the concept of process bank with separated foreground, middle and background

organizational structure and matrix management system of integrating business sections and lines, and

its concentrated background operating system is at a leading position in the industry. The Company’s core

production system construction is among the best in the industry, making it one of the few banks in the

country that have independent core system research and development capability and proprietary intellectual

property rights, as well as the only bank exporting core system technology in the country. It is the first to build

an integrated disaster recovery system integrating the master data center, same-city disaster recovery and

different-city disaster recovery, and one of the first banks in the country that comply with the international

disaster recovery standard (level-5) and the requirements of the disaster recovery stipulations of PBOC. The

Company’s key indicators, like key information system availability and gold card system transaction success

rate, have been among the best in the industry over the years.

The Company has nurtured and built a rational and pragmatic corporate culture. The Company has always

stuck to rational and pragmatic business strategies, and nurtured and built a simple and harmonious “home

culture”, a prudent and sound “risk culture”, a hard-working “diligence culture” and a sincere win-win “service

culture”, thus forming strong soft competitive power and attracting a professional financial team with high quality

and fighting capacity. Stability of the Company’s core team has always been widely praised in the industry.

46

II. Discussion and analysis on future development

(I) Industrial competition landscape and development trends

In 2014, the international situation indicates that the recovery momentum of US economy will be further

established, but the slow recovery trend of world economy will still continue. Seeing from the domestic

situation, under the general keynote of making steady progress in business development, the domestic

economy now enjoys a strong momentum of steady growth. However, there is a great possibility for continuous

slowdown of the growth of macro economy and the stress from structural adjustment will further reveal.

In terms of macro policy, focusing on implementing the spirit of the Third Plenary Session of the 18th Central

Committee of the CPC and comprehensively deepening the reform, macro-economic policies in general will

maintain consistent and stable with neutral and steady keynote and timely slight adjustments, centering on

creating relatively steady and favorable conditions for comprehensive and deepened reform. To be specific,

the proactive fiscal policy will pay close attention to optimizing expenditure structure, improving capital

usage efficiency and putting efforts into the prevention and control of risks from local government debts; and

the sound monetary policy is very likely to continue to be neutral and slightly tight in actual operation, and

therefore the market liquidity will maintain a tight balance status and the pattern of “tight credit in narrow sense

and loose financing in broad sense” will continue.

In respect of financial field, centering on the basic direction of “let the market decide the allocation of

resources”, measures for deepening financial reform will be accelerated and introduced and the financial

market environment will continue to go through profound changes with the tendency of financial “liberalization,

disintermediation, networking and customization” being gradually clear.

(II) The Company’s development strategy

The Company’s overall operating strategy in 2014 is: making steady progress in business development,

making steady achievements in business development, reasonably controlling business growth rate, focusing

on increasing structural adjustment, improving capital gain and operating quality, centering on the fundamental

tendency of financial “liberalization, disintermediation, networking and customization”, further speeding

up the transformation and innovation pace, cultivating new business and profit growth points, perfecting

organizational system and improving management mechanism based on transformation and innovation, and

continuously promoting the operation specialization and management refining level.

To be specific, firstly, the Company will stress capital management and capital gain in capital-saving mode

along the organic balance development road, and make more efforts on business structure adjustment mainly

based on capital returns. Secondly, the Company will continue to speed up transformation and innovation

pace. Centering on the financial liberalization tendency, it will pay close attention to improvement of the

product pricing and asset-liability management mechanism, innovate and upgrade traditional service functions

as well as provide more and better service to the general public. Focusing on the financial disintermediation

trend, it will continuously propel comprehensive operation, change the role definition of the bank, and

accelerate its extension from a credit and capital intermediary to information and capital intermediary. Based

on the financial networking tendency, it will actively explore and develop internet financial businesses, use

the concept, technology and business model of internet for reference, and boldly enhance the research and

development of financial products, the innovation and reform of service organizations and marketing models.

Following the financial customization tendency, it will stress on the promotion of its professional service ability

and reinforce the quick response to customers’ individual demands. Thirdly, the Company will promote the

group-oriented and comprehensive operation level. Focusing on transformation and innovation directions,

it will flexibly use the license resources, emphasize the collaborative linkage and cross-selling in the group,

exploit potentials in comprehensive operation in a better way and promote the comprehensive operation

47

efficiency. By strengthening and perfecting the group-oriented management systems and mechanisms, the

Company will enhance capital operation at appropriate time and cultivate new business growth points.

(III) Business objectives for 2014

1. Total assets to reach RMB4.16 trillion.

2. The balance of customer deposits to increase by approximately RMB220 billion.

3. The balance of loans to increase by approximately RMB157 billion.

4. The net profit attributable to the shareholders of the parent company to increase by approximately 10.2%

year-on-year.

III. Business overview

(I) Business institutions

1. Overview of business units

Unit Business addressNumber

of outlets

Number of

employees

Size of assets (RMB million)

Head Office 154 Hudong Road, Fuzhou - 3,532 648,216

Financial Markets 168 Jiangning Road, Shanghai - 94 279,215

Credit Card Center 500 Lai’an Road, Pudong New District, Shanghai - 910 59,663

Assets Custody Department 168 Jiangning Road, Shanghai - 103 19,520

Investment Banking Department 28 Jianguomen Nei Avenue, Dongcheng District, Beijing - 79 216,805

Beijing Branch 11 Section 3, Anzhen Xili, Chaoyang District, Beijing 46 1,896 254,994

Tianjin Branch 219 Yong’an Blvd., Hexi District, Tianjin 22 1,190 95,862

Shijiazhuang Branch 1 Weiming South Avenue, Qiaoxi District, Shijiazhuang 24 1,320 85,345

Taiyuan Branch 209 Fudong Street, Taiyuan 13 1,108 61,058

Hohhot Branch 5 Xing’an South Road, Xincheng District, Hohhot 12 845 56,060

Shenyang Branch 36 Shiyiwei Road, Heping District, Shenyang 17 1,092 46,832

Dalian Branch 136 Zhongshan Road, Zhongshan District, Dalian 12 632 35,918

Changchun Branch 309 Changchun Avenue, Changchun 11 814 39,302

Harbin Branch 88 Huanghe Road, Nan’gang District, Harbin 17 746 52,581

Shanghai Branch 168 Jiangning Road, Shanghai 41 2,096 289,430

Nanjing Branch 2 Changjiang Road, Nanjing 48 2,980 256,121

Hangzhou Branch 40 Qingchun Road, Hangzhou 42 2,349 144,519

Ningbo Branch 905 Baizhang East Road, Ningbo 13 757 46,013

Hefei Branch 99 Fuyang Road, Hefei 17 1,181 58,952

Fuzhou Branch 32 Wuyi Middle Road, Fuzhou 40 1,347 113,862

48

Unit Business addressNumber

of outlets

Number of

employees

Size of assets (RMB million)

Xiamen Branch 78 Hubin North Road, Xiamen 25 1,033 70,308

Putian Branch22 Xueyuan South Road, Chengxiang District, Putian

7 274 20,241

Sanming BranchBuilding 362, New Qianlong Village, Meilie District, Sanming

8 450 14,477

Quanzhou Branch Xingye Building, Fengze Street, Quanzhou 31 1,505 58,019

Zhangzhou Branch 27 Shengli West Road, Zhangzhou 13 520 27,703

Nanping Branch 399 Binjiang Middle Road, Nanping 9 340 11,731

Longyan Branch 46 Jiuyi South Road, Longyan 9 363 14,184

Ningde Branch 11 Jiaocheng South Road, Ningde 7 362 17,196

Nanchang Branch 119 Dieshan Road, Nanchang 13 943 30,640

Ji’nan Branch 86 Jingqi Road, Ji’nan 35 1,802 133,432

Qingdao Branch 7A Shangdong Road, Shinan District, Qingdao 11 619 60,744

Zhengzhou Branch 22 Nongye Road, Zhengzhou 28 1,237 107,647

Wuhan Branch 108 Zhongbei Road, Wuchang District, Wuhan 25 1,156 95,181

Changsha Branch 192 Shaoshan North Road, Changsha 25 1,062 105,253

Guangzhou Branch 101 Tianhe Road, Guangzhou 71 3,404 245,616

Shenzhen Branch 4013 Shennan Blvd, Futian District, Shenzhen 26 1,414 160,309

Nanning Branch 115 Minzu Blvd., Nanning 12 755 42,694

Chongqing Branch1 Honghuang Road, Hongqihegou, Jiangbei District, Chongqing

21 1,156 112,077

Chengdu Branch 936 Shijicheng Road, Gaoxin District, Chengdu 29 1,319 113,055

Guiyang Branch 45 Zhonghua South Road, Guiyang 2 211 24,173

Kunming Branch 138 Tuodong Road, Kunming 13 609 47,230

Xi’an Branch 1 Tangyan Road, Xi’an 19 1,041 115,572

Urumqi Branch 37 Renmin Road, Urumqi 11 548 42,878

Lanzhou Branch 75 Qingyang Road, Chengguan District, Lanzhou 1 96 11,308

Netting and summation adjustment within the system

(914,301)

total 826 47,290 3,627,635

Note: Data in the table above do not include Industrial Bank Financial Leasing Co., Ltd., China Industrial International Trust

Limited and CIB Fund Management Co., Ltd. Only level 1 branches (sorted according to administrative regions) which

were in operation as at the end of the reporting period are listed in the table above, while data of level 2 branches and

other sub-branches are included in the data of level 1 branches according to the management structure.

49

2. Overview of subsidiaries

(1) Industrial Bank Financial Leasing Co., Ltd.

Industrial Bank Financial Leasing Co.,

Ltd. is a whol ly-owned subsidiary of

the Company with registered capital of

RMB5 billion. During the reporting period,

Industrial Leasing continued to persist

in the operation concept as a “ large

platform” of the group, gave full play to its

function of “one body two wings”, seized

development opportunities, reinforced

risk management and strived to expand

businesses, thus maintaining steady and

rapid development of all businesses.

As at the end of the reporting period,

the total assets of Industrial Leasing

reached RMB53.695 billion, an increase

of RMB13.379 billion from the beginning

of the period, of which, the balance of financial leasing assets was RMB52.944 billion, up RMB12.97 billion

compared with the beginning of the period. Its shareholders’ equity was RMB6.838 billion, up RMB2.373 billion

(including capital increase of RMB1.5 billion) over the beginning of the period. The accumulated pre-tax profit

amounted to RMB1.166 billion and the after-tax net profit reached RMB873 million.

During the reporting period, Industrial Leasing continued to cultivate its professional ability and created

featured businesses and products with accumulated financial leasing projects amounting to RMB25.341

billion. Firstly, it continued to consolidate and promote the brand of green financial leasing and vigorously

developed green financial leasing business like energy conservation and emission reduction equipments.

As at the end of the reporting period, it developed 64 green financing lease projects, including energy

conservation and emission reduction business, with balance of lease of RMB16.549 billion. Secondly, it

orderly pushed forward the innovation and development of aviation leasing business. It developed the “bonded

leasing business for business aircraft”, deployed the bonded area SPV business aircraft leasing business

at Tianjin Dongjiang Bonded Port Area, exploited the “group-buying” business model for business aircraft,

signed strategic cooperation agreement with Bombardier, and officially launched the group-buying and leasing

business of business aircraft. As at the end of the reporting period, the balance of its aviation leasing business

stood at RMB784 million and it had a total of 14 aircrafts. Thirdly, it continuously made efforts to promote the

“professional and intensive” business operation model. With respect to business fields with large asset scale

like the energy conservation and emission reduction (sewage treatment, waste heat and top pressure power

generation), coal, chemical industry and steel, it reinforced the study on the industry, lease item, customer

demand, business model and risk control measures, and improved its professional operation capacity in

key business area. Fourthly, it made great efforts to strengthen its asset operation and management ability.

Through actively exploring the leasing asset operation business model and channel with the amount and the

increment, it reinforced the cooperation with financial institutions like banks, brokers, asset management and

finance companies to carry out leasing asset factoring business and accomplished a total of RMB4.69 billion

non-recourse factoring business for leasing asset in the whole year, expanding the source of income from

intermediate business.

(2) China Industrial International Trust Limited

China Industrial International Trust Limited is a holding subsidiary of the Company with registered capital

of RMB2.576 billion at the end of the period (capital increase to RMB5 billion in February 2014) and the

50

Company holds 73% of its total capital. Its business covers

fund trust, movable property trust, immovable property trust,

negotiable securities trust, other property or property right trust

and other businesses stipulated by laws and regulations or

approved by China banking regulatory agencies.

During the reporting period, Industrial Trust steadily pushed

forward business transformation and structural adjustment,

continued to strengthen comprehensive risk management and

internal control, focused on improving its proactive management

capability and business innovation ability and achieved the

best performance on key business indicators again since its

established by adopting “comprehensive, diversified, and

featured top trust company” as its strategic target. As at the end

of the reporting period, its owned assets amounted to RMB5.384

billion, up 30.30% from the beginning of the period. During the

reporting period, Industrial Trust realized operating income of

RMB2.054 billion, total profit of RMB1.467 billion and net profit of

RMB1.106 billion, representing increases of 42.15%, 42.15% and

43.26% respectively, and its average weighted ROE reached 24.80%. Its own assets, gains and losses were

included in the Company’s consolidated financial statement, but its trust assets, gains and losses were not

included.

As at the end of the reporting period, Industrial Trust offered 1,757 trust products, with trust business size

reaching RMB563.286 billion, up 68.07% from the beginning of the period. Its trust business products mainly

fell into the two types of fund trust and property trust: fund trust referred to trust taking monetary capital as

the entrusted property with business size of RMB547.530 billion at the end of the period, up 67.44% over

the beginning of the period; and property trust referred to trust taking movable property, immovable property,

property right and their combinations as the entrusted property with business size of RMB15.756 billion at

the end of the period, up 93.61% over the beginning of the period. In respect of equity investments, Industrial

Trust has currently invested and held equity in Zijin Mining Group Financial Co., Ltd., Huafu Securities Co.,

Ltd. and Chongqing Machinery and Electronics Holding Group Finance Company Limited, and has a good

equity investments return from its wholly owned subsidiary China Industrial Asset Management Limited.

(3) CIB Fund Management Co., Ltd.

CIB Fund Management Co., Ltd. was newly established in April 2013 with registered capital of RMB500

million and the Company held 90% of its total capital. In June 2013, CIB Fund Management was approved

to establish CIB Fund Management Co., Ltd. Shanghai Branch and its subsidiary CIB Wealth Management

Co., Ltd. successively. CIB Wealth Management Co., Ltd. is wholly owned by CIB Fund Management with

registered capital of RMB200 million and its business covers asset management for specific customers and

other businesses approved by CSRC.

During the reporting period, based on the advantages of group-oriented operation and market demands in the

pan-asset management era, CIB Fund Management stuck to the specialized development road, persisted in

developing public offering and non-public offering simultaneously, and boosted the diversified development

of business. In respect of public offering, it proactively carried forward the design of various standard market

fund products and prepared to apply for the public offering of fund in accordance with market development

tendencies. With regard to non-public offering, it actively carried out management business of specific

customers’ assets and strengthened services to institutions and customers with high net worth. As at the end

of the reporting period, the total assets management size of CIB Fund Management and its subsidiary reached

RMB49.979 billion, of which, the product management size of special account was RMB1.329 billion and the

51

size of asset management plan for special projects was RMB48.650. During the reporting period, CIB Fund

Management made accumulated operating income of RMB84.97 million and net profit of RMB12.81 million.

(II) Analysis of business segments

1. Corporate finance business

(1) Overview

During the reporting period, in terms of the corporate finance business, the Company accurately captured

changes of the macro situation and actively coped with market challenges by following the overall requirement

of “making steady progress in business development and pursuing scientific development” and “making overall

planning for steady development and transformation for potential increase”. Centering on the two main lines

of improving professional operation ability and organic growth motivation, the Company also continuously

deepened the reform and accelerated the transformation and upgrading. Firstly, its market share increased

steadily. By conquering such challenges as the slowdown of economic growth, tight monetary policy and

severe market competition, its corporate deposit business witnessed a steady growth. As at the end of the

reporting period, the balance of corporate deposits amounted to RMB1,814.338 billion, up RMB303.251

billion or 20.07% over the beginning of the period. Secondly, the regional market maintained balanced and

rational. During the reporting period, the market share of 27 branches in corporate deposit increased over

the beginning of the period and 25 branches ranked in the first three places in terms of market share of the

local market. Thirdly, customer development was healthy and orderly. There were totally 342,100 corporate

finance customers (excluding individual business), up 54,100 customers or 18.78% over the beginning of the

period. Fourthly, the quality of assets remained at a good level in the industry. The balance of non-performing

corporate loans was RMB8.38 billion with the NPL ratio at 0.85%.

To make innovations on the transformation of corporate finance business, the Company stressed on the

building of a new business pattern with financing diversification, fund raising diversification, settlement

modernization and financial income diversification through such measures as proactively adjusting business

structure, optimizing resource allocation and increasing asset circulation. It also focused on the new top three

business functions represented by investment banking, trade financing and cash management, effectively

boosted business transformation and comprehensively promoted the business of each speciality.

(2) Investment banking business

While actively coping with changes of the external operation condition and focusing on the two main

lines of improving professional operation ability and organic growth motivation proposed by the corporate

finance headquarter, the Company also put forth efforts into product innovation, customer marketing and

system construction, continuously perfected the investment banking function system and accelerated the

construction of a professional team, hence keeping a good development trend in business. Meanwhile, the

Company also vigorously carried out such businesses as debt financing instruments issued by non-financial

enterprises, bond issued by financial enterprises, direct financing instruments for fund management, M&A

loans and syndicated loan, actively seized the opportunity of expansion of pilot credit assets securitization and

orderly pushed forward the development of credit assets securitization, thus satisfying corporate customers’

diversified financial service demands preferably. During the reporting period, the Company has served as the

lead underwriter for debt financing instruments issued by non-financial enterprises amounting to RMB241.249

billion, up RMB40.006 billion or 19.88% year-on-year. The Company has also served as the lead underwriter

for 82 issues of RMB78.245 billion non-public offering of debt financing instruments, taking a leading position

among banks both in the amount of offering and in the number of issuers as a lead underwriter.

Paying high attention to the credit assets securitization, the Company has always been proactively

participating in the pilot of credit assets securitization since the decision of further expanding the pilot of credit

52

assets securitization by executive meeting of the State Council in August 2013.

(3) Trade financing business

While continuously strengthening study on market situation and regional analysis of branches, the Company

focused on the research, development and promotion of key products adapting to the market situation,

and proactively carried forward the construction of professional trade financing system. As at the end of

the reporting period, the balance of trade financing business was RMB372.498 billion, up 16.89% from

the beginning of the reporting period; the volume of trade financing business stood at RMB861.582 billion,

up 37.28% year-on-year; the volume of international settlement in local and foreign currencies reached

USD99.076 billion, of which, the accumulated volume of international settlement in foreign currency was

USD83.434 billion, up 33.33% year-on-year; the accumulated volume of cross-border RMB settlement was

RMB96.005 billion, up 128.13% year-on-year; and the balance of corporate deposits in foreign currency was

USD23.589 billion, maintaining a leading position among the same type of joint-stock commercial banks.

The industrial financing business witnessed a good start and the automobile financing took on a rapid growing

status. As at the end of the reporting period, there were 2,744 effective customers, increasing by 1,202

customers from the beginning of the reporting period, and the balance of business was RMB66.099 billion, up

RMB24.178 billion over the beginning of the period.

(4) Cash management business

Not only had the number of customers witness substantial growth, the average daily customers’ assets

for cash management also experienced leap-forward development. There were 8,621 cash management

customers, increasing by 3,754 customers from the beginning of the period. The flow of each business grew

steadily and the balance of average daily deposits of cash management customers stood at RMB425.8 billion,

up RMB227.4 billion year-on-year. The total average daily assets for cash management were RMB95 billion,

increasing by 2.5 times year-on-year.

(5) Environment finance business

By making use of green financial products and multiple financial instruments, the Company comprehensively

supported the energy conservation and environment protection undertaking with green financial business

developing rapidly. As at the end of the reporting period, the Company accumulatively provided RMB341.3

billion green financing to no less than a thousand enterprises and the financing balance of green finance

stood at RMB178.097 billion. The green financial business covered the three major fields of low carbon

economy, circular economy and ecological economy, including numerous project types like energy efficiency

improvement, development and utilization of new energy and renewable energy sources, carbon emission

reduction, sewage treatment and water area treatment, sulfur dioxide emission reduction and solid waste

recycling, as well as such mainstream industries as energy, construction, traffic, and etc. Making breakthrough

on green financial business in such service areas as water resource utilization and protection, energy

conservation and environment protection has been one of the Company’s most differential and characteristic

operation business. According to estimates, the projects supported by the loans can achieve in China an

annual saving of 23,443.4 thousand tons of standard coal, together with an annual emission reduction of

68,687.6 thousand tons of carbon dioxide, 901.2 thousand tons of chemical oxygen demand (COD), 16.7

thousand tons of ammonia nitrogen, 95.8 thousand tons of sulfur dioxide, 24.1 thousand tons of nitrogen

oxides, as well as integrated utilization of 15,043.9 thousand tons of solid waste a year and an annual water

conservation of 255.79 million tons.

Comprehensively being in support of the construction of domestic trading markets of emission rights, the

Company followed the pilot of domestic carbon transaction and comprehensively supported the construction

of trading markets of emission rights, thereby forming a comprehensive solution for carbon financial service

covering settlement, financing, intermediary and asset management, and creating a carbon financial service

platform. Currently, the Company has had full cooperation with some national carbon transaction pilot regions,

53

providing a package of financial services including transaction structure, system design, fund custody and

liquidation, and actively promoting the construction of domestic carbon transaction markets. In respect of

the trading of emission rights, as one of the first banks involving in the domestic trading markets of emission

rights, the Company took the lead in cooperation with national pilot areas for institutional framework and

system design for the trading of emission rights and provided comprehensive financial services for emission

rights. Meanwhile, it had full cooperation with some national carbon transaction pilot regions, providing

such professional financial services as consultation for designing the system of emission right transactions,

development of the trading and settlement systems of emission rights, emission right pledge credit and project

finance for pollutant emission reduction, and actively promoting the construction of domestic trading markets

of emission rights.

Product innovation kept advancing. The Company released such innovative products as contractual

environment service and pledge of franchise rights, and launched the innovative products like contractual

energy management, mortgage finance with emission rights and financing projects on energy conservation

and emission reduction. Specific to financial requirements of corporate customers in the energy conservation

and emission reduction field, the Company reviewed, integrated, upgraded and promoted the “Green Finance

· Overall Strategy (2013)” green finance plan, covering multi-level and comprehensive product and service

system of financial products, service mode and solutions, including ten general products, seven featured

products, five financing modes and seven solutions.

The influence of the brand of green finance expanded increasingly. During the reporting period, the Company

assisted to organize the “Excess Capacity Settlement & Fulfillment of Green Finance Conference of China

Banking Industry”, participated in the formulation of green credit statistics, green credit evaluation and

implementation plan, loans for energy efficiency of CBRC and other green credit policies, launched the official

micro-blog for green finance, and carried out the “2013 Beautiful China Tour · Green Finance Activities” in

12 provinces and cities including Hebei, Guangdong, Inner Mongolia, and etc. The Company was awarded

the “Prize of Financial Institution for Social Responsibility of the Year” and the “Prize of Best Green Finance

for Social Responsibility” by China Banking Association, was granted the “2013 Prize of Best Corporate for

Sustainable Development” by China Urban Economy Sustainable Development Committee, won the title of

“2012 Best Financial Investment Institution in China’s Energy-saving Service Industry” assessed by ESCO

Committee of China Energy Conservation Association, ranked among the “2013 China Top 100 Green

Companies” elected by China Entrepreneur Club, and won the special awards of Best Green Bank, Award of

Low-carbon Pioneer Enterprises, Competitive Bank for Green Financial Service and Environmental Protection

Enterprise elected by domestic authorities and media.

(6) Small enterprise business

The Company boosted the construction of professional operation

system for small and micro enterprises and took the lead in adjusting

the customer orientation for small enterprises. By focusing on small

and micro enterprises with total assets below RMB60 million, the

Company built the three-tier organization management system

consisting of the Small Enterprise Department at head office, Small

Enterprise Department at branches and Urban Small Enterprise

Center, accelerated the construction of the small enterprise team, and

stressed on the launch of such innovative products as “The Three Loan

Services”, “Easy & Fast Loan”, “Consecutive Loan” and “Transaction

Loan” for small enterprises with good market response. As at the end of

the reporting period, the small enterprise customers in the customized

statistics of the Company totaled 221.2 thousand, up 37.5 thousand

customers or 20.44% from the beginning of the period; and the balance

54

of loans for small businesses increased by RMB33.688 billion to RMB83.656 billion, up 67.42%. The Company

continued to promote the service brand of the “Industrial Bank Sesame Blooming – Growth and Listing Plan

for SMEs”, forming the service framework with six sections of “capital navigation, capital infusion, IPO service,

‘new three board’ listing, private offering of bonds by SMEs, marketing planning and access outsourcing”.

(7) Institutional business

By focusing on core liabilities, strengthening structural improvement, centering on improving organizational

guarantee and perfecting management mechanism, the Company’s institutional liabilities realized rapid

development. As at the end of the reporting period, the balance of institutional deposits of the Company

was RMB444.746 billion, up RMB95.367 billion or 27.30% from the beginning of the reporting period, and

the average daily deposits were RMB414.728, up RMB116.619 billion over the beginning of the period. The

Company stuck to customer focus and market orientation, scientifically segmented the market and customer

groups, reinforced refined customer service and marketing management, resulting in a sustained and stable

growth in customer group. As at the end of the reporting period, the number of institutional customers reached

17,839, representing an increase of 4,326 or 32.01% from the beginning of the reporting period. The Company

further enriched the product line of institutional finance business and provided institutional customers with fully

integrated financial services. The focus on fiscal businesses have driven the rapid development of institutional

finance business, and as at the end of the reporting period, the Company has obtained 196 qualifications as

fiscal agency, up 77 or 64.7% from the beginning of the reporting period.

2. Retail business

(1) Retail banking business

During the reporting period, the Company’s retail banking business conformed to changes of the macro-

economic situation, constantly got close to the market, and satisfied customer demands. Focusing on the “big

retail” and the four key work of “system mechanism, channel building, product research and infrastructure”,

the Company accelerated the construction of retail system and innovation system, reinforced the construction

of retail foundation platform, continuously improved the retail channel network, and comprehensively promoted

the influence of retail brand of Industrial Bank, thereby maintaining healthy development in all retail businesses

and continuously enhanced profitability.

In respect of retail liability business, through carrying out payroll service, third party custody and “Business

Express” collection business, the Company laid a solid foundation for liability business, upgraded and released

the optimized “Enjoyable Life” 2.0 comprehensive financial service solution to satisfy diversified demands of

the aged customers and create the first pension finance brand in China. As at the end of the reporting period,

there were 3,337.1 thousand core retail customers (excluding Platinum credit card customers), up 45.13%

from the beginning of the period; and the balance of retail personal deposits stood at RMB356.007 billion,

representing an increase of 17.81% over the beginning of the period.

With respect to retail credit business, under the national policy guidance on supporting and promoting the

rapid development of tourism, the Company innovated and pushed forward the “Suixingyou” (Interest-guided

Tour) comprehensive finance service program for personal tour, captured the market opportunities, cultivated

and accumulated high quality retail customers and improved the comprehensive income from retail business.

During the reporting period, the Company granted accumulated 119.2 thousand loans for personal tour,

amounting to RMB11.278 billion. As at the end of the reporting period, the balance of loans for personal tour

stood at RMB353.644 billion, up 17.91% from the beginning of the period. The interest income from retail

loans was RMB20.377 billion, up 16.11% year-on-year.

As for retail wealth business, with the purpose of promoting customer service capability, product marketing

capacity and intermediate business income, the Company continued to innovate the supply mode of general

55

retail wealth management products, set up supply platform for agent products, actively push forward

innovative wealth management products and boost the rapid development of retail wealth management

business through restructuring the marketing service system of retail wealth management business. As at

the end of the reporting period, the sales (excluding precious metals) of comprehensive wealth management

products reached RMB843.020 billion, up 65.25% year-on-year; the volume of trading businesses (precious

metals and foreign exchange) reached RMB206.256 billion, up 23.89% year-on-year; and the income from

retail intermediary business was RMB8.886 billion, up 81.42% year-on-year.

In the area of retail channel, by implementing the “low cost expansion” strategy, the Company vigorously

improved construction of the retail channel network. Centering on the strategy transformation and rapid

development requirements of retail business, it launched the community bank service mode, kept up with the

internet finance development pace, established marketing system of retail E-banking, constantly improved

customer experience, actively boosted the construction of E-banking marketing service area in business

outlets, strengthened the marketing publicity of retail E-banking and expanded the brand influence.

(2) Credit card business

Centering on the overall development planning of retail business, in

respect of the credit card business, the Company closely followed

the industry development frontier, relied on advantages of the big

retail system, accelerated the transformation of development mode,

continuously pushed forward the operational transformation, and

steadily carried forward the transformation of the operation and

management mode towards refinement and intensification, thus

realizing steady progress in operation efficiency and management

level and obviously enhanced customer service capability. As at the

end of the reporting period, the Company has issued an aggregate of

11.953 million credit cards, while 1.391 million cards were new issues.

During the reporting period, the transaction amount of credit cards

was RMB302.486 billion, up 75.58% year-on-year. The accumulated

income was RMB7.213 billion, up 79.98% year-on-year.

The low carbon credit card was the first affinity card with the theme of

low carbon issued by the Company together with Beijing Environment

Exchange in China. Through the personal purchase platform for

carbon emission reduction, the card holder can purchase corresponding carbon emission reduction based on

his/her predicted annual carbon emission and realize carbon reduction. As at the end of the reporting period,

the Company has issued an aggregate of 235 thousand low carbon credit cards with accumulated voluntary

purchase of 52 thousand tons of carbon emission reduction, powerfully supporting the 72MW hydropower

carbon emission reduction project at Dongping, Hunan, the East Hengdaishan wind power carbon emission

reduction project at Huanan and the 20MW hydropower carbon emission reduction project at Wengyuan,

Guizhou, being equivalent to the reduction of carbon emission generated by the flight for 1,000km of 375

thousand persons by plane, thus realizing the historical leap of the environmental protection concept from

corporate financing to individual consumption.

(3) Private banking business

By focusing on business innovation and resource integration, the Company continuously promoted the market

influence and scale benefit of private banking business and pushed forward business transformation. During

the reporting period, RMB141.9 billion of wealth management products were offered accumulatively, with

the number of private banking customers increased by 44% from the beginning of the reporting period. The

Company constantly impelled the construction of the private banking business system, enhanced its own

56

professional capability, improved its service level, and thus providing customers with all-round services. By

dividing customers based on their net financial asset value, the Company provided characteristic high-end

overseas activities, Industrial Bank Forum by Famous Persons and “overseas-education manager” speaking

tour, and etc., to different levels of customers, and promoted the customized information service especially for

private banking customers.

3. Financial market

(1) Interbank business

During the reporting period, the total number of securities firms

networked for the third party custody service was 96, and the

total number of online margin deposit securities firms was 40.

Through further improving the access permission mechanism

and risk control mechanism for cooperated trust firms, the

supply of high quality wealth management products was

increased and the number of cooperated trust firms reached 64

with market coverage ratio of 97%. The number of direct online

bank-wealth management customers was 79.

As the initiative interbank cooperation brand pushed forward

by the Company in China, the Bank-to-Bank Platform was

an integral service system integrating internet finance and

offline finance, providing various cooperative banks with

comprehensive financial service solution covering wealth

management , payment and set t lement , technolog ica l

management output, training service, f inancing service,

optimization of capital and asset-liability structure, and etc.

As at the end of the reporting period, the number of signed

customers on the Bank-to-Bank Platform amounted to 474 with

online customers of 392. The counter inter-operation network connected over 25.8 thousand outlets. In total

12.1685 million settlement transactions were completed on the Bank-to-Bank Platform, up 31.30% year-on-

year, while the transaction amount reached RMB1,317.563 billion, up 21.6% year-on-year, hitting a new record

high in both the number and amount of settlement transactions in one year. The Company had cooperation

with a total of 218 commercial banks on the construction of information system, including 22 new banks.

(2) Treasury business

During the reporting period, based on the judgment of the trends of macro-economy and market interest

rates, the Company properly controlled the increase of total assets. Being through the tight market liquidity

in June and regulatory policies adjustment in the second half year, the Company appropriately reduced the

leverage, adjusted asset structure, and constructed investment portfolio with low risk and high liquidity. In

respect of bonds, the Company strictly controlled the duration of bonds and the increase of investment scale

in operating strategy, seized the opportunity to initiatively reduce the holding of bonds with low earnings and

increase the holding of national and local bonds with low risks. In respect of market making transactions, while

continuing to maintain its most active market making position in such fields as RMB exchange rate, interest

rate and precious metals, the Company also adjusted its operation strategies in a timely manner according

to the market situations, with the profitability of market making business obviously growing steadily year-on-

year. During the reporting period, the Company also actively participated in the transactions of innovative

businesses released by the exchange, such as the interbank gold bilateral forward and swap transactions on

Shanghai Gold Exchange, and the silver futures transactions on Shanghai Futures Exchange. In respect of

57

the broker business, the Company’s commissioned transactions of precious metals still remained competitive

advantages under the multiple adverse impacts of the poor market environment of precious metals and the

increasingly fierce competition of the industry. During the reporting period, the business volume of precious

metals commissioned transactions increased by 26.39% year-on-year, with market share ranking at the

second place in the industry.

The market influence of the research and analysis on the financial market was further enhanced, keeping a

high accuracy on the judgment of macro-economic trend, and a leading level on the judgment of important

policies and the forecast of monthly macroeconomic data in the industry.

(3) Asset custody business

By implementing the development strategy of “centering on brand construction, by means of specialized

service, being initiative in marketing, providing initiative services, continuously promoting the market share

and profitability of asset custody business, and affording powerful support to the development of other

businesses”, the Company gave play to its advantages and experience on speciality, service and innovation,

and thus maintaining a healthy and rapid development in asset custody business and successfully achieving

all the predetermined targets. As at the end of the reporting period, the net value of assets under custody

exceeded RMB3 trillion and amounted to RMB3,086.209 billion, up RMB1,457.954 billion or 89.54% from the

beginning of the period, ranking at the sixth place and remaining a top position in the industry. A total of 8,679

new custody products were launched, and the number of online custody products was 8,114. The total income

of intermediary businesses reached RMB3.358 billion, up RMB1.864 billion or 124.77% year-on-year.

The Company’s primary custody businesses maintained healthy development. Among them, the securities

investment funds under custody reached RMB37.081 billion, up 15.57% from the beginning of the period; the

customer assets management of fund firms under custody stood at RMB135.699 billion, up RMB124.3 billion

or 1,090.45% over the beginning of the period; the customer assets management of securities firms under

custody were RMB820.925 billion, up RMB377.404 billion or 85.09% from the beginning of the period; the trust

properties under custody were RMB945.862 billion, representing an increase of RMB470.374 billion or 98.92%

over the beginning of the period; the bank financial products under custody reached RMB591.945 billion,

increasing by RMB131.942 billion or 28.68%; the insurance assets under custody stood at RMB224.043

billion, seeing an increase of 2.68%; and the insurances under independent superintendent were RMB98.26

billion, up 143.82% from the beginning of the period.

(4) Asset management business

Wealth management business refers to the Company’s investment and asset management in the way

agreed with the customer in advance upon the customer’s entrustment and authorization, and the customer’s

undertaking corresponding risks and enjoying corresponding earnings as agreed, covering such products

as wealth management products for retail, wealth management products for corporate customers, interbank

wealth management products, and etc. The wealth management business involves multiple links like

investment management, product r&d, issuance and sales and background operation, with specific work

flows mainly including product creation, product approval, marketability approval and schedule arrangement,

supervision report and information registration, product sales, product investment management and duration

management, and etc.

During the reporting period, the Company continued to promote the transformation of the operation of asset

management business, reinforced the overall management of business, improved the specialized operation

level and realized RMB6.988 billion intermediate business income from wealth management business. At the

end of the reporting period, the balance of the Company’s wealth management products stood at RMB500.553

billion, up 13.14% from the beginning of the reporting period. In addition to the RMB42.911 billion guaranteed

wealth management products which were included in the balance sheet, the balance of the rest wealth

management products issued and managed by the Company but not included in the consolidation scope was

58

RMB457.642 billion.

The Company took initiative in promoting the innovation of wealth management products and guaranteed

the market competitiveness of wealth management business. It innovated and pushed out such products as

the Daily WLB (Wanlibao) open-ended wealth management, Enjoyable Life program and night market wealth

management, promoted the business processing efficiency, improved system function and enhanced customer

convenience, thus further boosting product competitiveness. The open-ended wealth management product

system was basically formed, covering three types of customers, including individual, corporate finance and

interbank, with product scale growing steadily with good stability and low comprehensive operating cost.

According to relevant regulatory requirements of CBRC, on basis of the current business mode, the Company

increased the investment proportion on standard assets like bonds, equity assets like equity investments and

structural innovation assets, thereby leading to the steady growth of asset management business and laying

a foundation for the business mode innovation, investment variety and cooperation channel expansion and

system building improvement in 2014.

(5) Futures financial business

As at the end of the reporting period, the balance of deposits of futures firms was RMB6.47 billion, up

RMB1.875 billion or 40.81% year-on-year; and the balance of daily average deposits of futures firms was

RMB5.781 billion, up RMB823 million or 16.6% year-on-year. As confirmed by China Financial Futures

Exchange and Dalian Commodity Exchange respectively, the Company has had the qualifications for futures

margin custody business, not only becoming the first joint-stock commercial bank for futures margin custody

business appointed by two exchanges in China, but also one of the first two joint-stock banks appointed by

Dalian Commodity Exchange.

4. E-banking

During the reporting period, in respect of the e-banking business, focusing on accelerating the internet finance

innovation, improving customer experience and strengthening risk management, the Company further clarified

its operating characteristics and provided each business line with professional e-banking service support at

the same time of maintaining steady and rapid growth in business. The Company launched the family wealth

management product in the internet era “e-family Wealth”, realizing the one-stop value-added services like

the uniform management of revenue and expenditure of the family bank card and assets, the on-line wealth

management planning and wealth management information. Closely following the latest technologies and

applications, the Company also launched such functions as the WeChat bank, wealth management night

market, payment and collection at the customer-end mobile phone banking via two-dimension code, view and

broadcast of precious metals market information by “shake it”. Moreover, the Company vigorously promoted

the building of innovative projects like mobile payment, “direct banking” and “remote banking”, accelerated the

external alliance cooperation and resource integration, created highlights and improved service capability.

Centering on customers, the Company built the e-banking customer-end for laptops, the customer-end mobile

phone banking for windowsphone8 and the e-banking payment platform, upgraded the phone banking system,

short message platform and online mart, and finished the construction of Chengdu Customer Service Center

and officially put it into operation. It also promoted the research on risk management of e-banking, increased

the dynamic password authentication for important transactions, released the second generation network

shield certificate, introduced professional manufacturers to have security assessment on e-banking, and

further improved the risk prevention system of e-banking.

As at the end of the reporting period, the Company had 178.8 thousand active corporate and interbank

online banking customers, up 28.15% from the beginning of the period; 6.6968 million active personal online

banking customers, up 26.51% from the beginning of the period; 2.7385 million active mobile banking online

59

and customer-end customers, up 129.64% from the beginning of the period; and 6,459.2 thousand active

messenger users, up 46.42% from the beginning of the period. During the reporting period, the number of

corporate and interbank online banking transactions was 59.1062 million, up 52.68% year-on-year, while

the transaction amount was RMB33.63 trillion, up 53.18% year-on-year. The number of personal online

banking transactions was 137,003.9 thousand, up 21.91% year-on-year, while the transaction amount was

RMB5,540.628 billion, up 45.16% year-on-year. The number of mobile phone banking transactions was

11,664.5 thousand, up 37.66% year-on-year, while the transaction amount was RMB282.252 billion, up

372.77% year-on-year. During the reporting period, the substitution rate of e-banking transactions reached

76.48%, up 4.64 percentage points year-on-year, while the e-banking transactions (transactions of variation of

funds) exceeded triple the number of transactions of all the operating outlets of the Company, which effectively

reduced the OTC transaction workload, and released the productivity of OTC channels.

(III) Analysis of loan quality

1. Five-category classification of loans

Unit: RMB million

Item 　December 31, 2013 December 31, 2012

Balance Percentage (%) Balance Percentage (%)

Pass 1,338,037 98.60 1,217,070 99.02

Special mention 8,689 0.64 6,808 0.55

Substandard 5,620 0.41 2,676 0.22

Doubtful 3,483 0.26 1,932 0.16

Loss 1,228 0.09 678 0.06

total 1,357,057 100 1,229,165 100

As at the end of the reporting period, the balance of the Company’s NPLs stood at RMB10.331 billion, up

RMB5.045 billion from the beginning of the period with NPL ratio of 0.76%, up 0.33 percentage point over the

beginning of the period. The balance of special mention loans was RMB8.689 billion, up RMB1.881 billion from

the beginning of the period. The proportion of the special mention loans in the total loans was 0.64%, up by

0.09 percentage point compared with the beginning of the period. Main reasons for the increase in NPLs and

special mention loans were that some enterprises were affected by such factors as the slowdown of economic

growth, adjustment of industrial structure and private lending or suffered from increased credit risks in some

regions or some industries, causing their solvencies to drop, shortage of fund and capital chain rupture.

Meanwhile, it will take time to mitigate risks, collect and dispose non-performing assets. Many factors caused

increase in NPLs and special mention loans of the Company.

During the reporting period, the Company’s asset quality remained at a healthy level. The Company managed

risks from the asset portfolio, industry chain and risk infectivity with much more prospective, systematic and

overall risk management thoughts. Meanwhile, the Company strengthened the control of special mention loans

and loans overdue with outstanding interest, and accelerated and completed the collection and settlement of

NPLs while effectively controlling newly increased non-performing assets.

60

2. Provision for and write-off of loan impairment

Unit: RMB million

Item Amount

Opening balance 24,623

Provision during the reporting period (+) 16,417

Transfer-out of interest on impaired loans (-) 387

Write-back during the reporting period of write-off in previous years (+) 113

Write-off during the reporting (-) 897

Other transfer-out during the reporting period (-) 3,494

Closing balance 36,375

Description of method for impairment loss on loans: if loans are impaired, the carrying amount of loans is

reduced to the present value of estimated future cash flows (excluding future credit losses that have not

been incurred) discounted at the original effective interest rate. The amount of reduction is recognized as an

impairment loss in profit or loss. For a loan that is individually significant, the Company assesses the asset

individually for impairment. For a loan that is not individually significant, the Company assesses the asset

individually for impairment or includes the asset in a group of loans with similar credit risk characteristics

and collectively assesses them for impairment. If the Company determines that no objective evidence of

impairment exists for an individually assessed loan, it includes the loan in a group of loans with similar credit

risk characteristics and collectively reassesses them for impairment. Loans for which an impairment loss

is individually recognized are not included in a collective assessment of impairment. If, subsequent to the

recognition of an impairment loss on loans, there is objective evidence of a recovery in value of the loans

which can be related objectively to an event occurring after the impairment is recognized, the previously

recognized impairment loss is reversed. However, the reversal is made to the extent that the carrying amount

of loan at the date the impairment is reversed does not exceed what the amortized cost would have been had

the impairment not been recognized.

3. Classification of provision for loan impairment

Unit: RMB million

Provision for loan impairment December 31, 2013 December 31, 2012

Individually assessed provision for loan impairment 3,139 2,025

Collectively assessed provision for loan impairment 33,236 22,598

total 36,375 24,623

61

4. Changes in overdue loans

Unit: RMB million

ItemDecember 31, 2013 December 31, 2012

Balance Percentage (%) Balance Percentage (%)

1-90 days (inclusive) overdue 5,997 41.85 4,505 49.48

91-360 days (inclusive) overdue 6,212 43.35 2,400 26.36

361 days – 3 years (inclusive) overdue 1,903 13.28 1,437 15.78

Over 3 years overdue 218 1.52 763 8.38

total 14,330 100 9,105 100

As at the end of the reporting period, the balance of the Company’s overdue loans was RMB14.330 billion,

increased RMB5.225 billion from the beginning of the reporting period, of which overdue corporate loans

and credit cards overdue increased by RMB4.245 billion and RMB1.236 billion respectively, and overdue

personal loans decreased by RMB256 million. The primary causes for the increase were that some enterprises

were significantly impacted by macro-economic adjustments or had problems with their operations and

management, resulting in difficulties in repaying loans or default. During the reporting period, the Company

further enhanced the risk management of overdue loans, conducted ongoing monitor of the loans overdue with

outstanding interest and made more aggressive collection efforts. The proportion of the overdue loans in the

total loans rose slightly over the beginning of the period, but still remained at a relatively low level.

5. Changes in restructured loans

Unit: RMB million

Item

December 31, 2013 December 31, 2012

BalancePercentage in total

loans (%)Balance

Percentage in total loans (%)

Restructured loans 996 0.07 981 0.08

As at the end of the reporting period, the balance of the Company’s restructured loans was RMB996 million,

up RMB15 million compared with the end of last year, basically maintaining stable. The balance of restructured

loans increased, mainly because few enterprises borrowed for repaying due to provisional capital turnover.

The overall risk was under control.

62

(IV) Foreclosed assets and impairment provision

Unit: RMB million

Item December 31, 2013 December 31, 2012

Foreclosed assets 231 648

Incl: Buildings 199 616

Land use right 31 31

Others 1 1

Less: Impairment provision (95) (169)

Net value of repossessed assets 136 479

During the reporting period, the Company obtained foreclosed assets with a total book value of RMB34 million,

which were mainly buildings and land, and recovered RMB451 million from the disposal of foreclosed assets,

thereby decreasing the total net book value of foreclosed assets by RMB417 million. In addition, the Company

added provision of RMB3 million for impairment of foreclosed assets, transferred RMB 77 million provision for

disposal of foreclosed assets, thus the balance of provision for impairment of foreclosed assets decreasing by

RMB74 million.

(V) Categories and par value of financial bonds held

Unit: RMB million

Item Par value

Bonds of policy banks 58,329

Bank bonds 6,895

Bonds of non-bank financial institutions 10,099

total 75,323

Provision for impairment: as at the end of the reporting period, the Company checked the financial bonds it

held and found no impairment. Therefore, no bad debt provision was made.

63

(VI) Top ten financial bonds held at the end of the reporting period

Unit: RMB million

Item Par value Annual interest rate (%) Maturity date

07 CDB 08 5,520 3.60 2017-05-29

12 CDB 24 3,370 3.72 2019-05-22

09 CDB 12 3,010 3.70 2019-09-23

10 ADBC 15 3,000 3.49 2015-11-19

10 CDB 24 2,820 3.45 2020-08-26

09 CDB 21 2,750 3.57 2016-11-18

12 CDB 23 2,460 3.78 2017-05-03

09 EIBC 11 2,200 3.40 2014-11-25

07 ADBC 06 2,160 3.60 2014-05-18

10 CDB 25 2,000 3.05 2015-09-07

(VII) Derivative financial instruments held at the end of the reporting period

Unit: RMB million

Item Nominal valueFair value

Asset Liability

Interest rate derivatives 372,459 4,142 3,989

Exchange rate derivatives 504,752 2,195 2,741

Precious metals derivatives 5,264 68 134

Credit derivatives 670 9 -

total 　 6,414 6,864

(VIII) Financial instruments denominated in foreign currencies held by the Company

Unit: RMB million

ItemOpening balance

Gains and losses in the period from changes in

fair value

Accumulated changes in

fair value recognized in

equity

Provision for impairment

made in the period

Closing balance

Held-for-trading financial assets - - - - -

Derivative financial assets 983(1,765)

--

--

313

Derivative financial liabilities 1,776 2,871

Investment in accounts receivable - - - - -

Available-for-sale financial assets 1,050 - 56 - 2,139

Held-to-maturity investment 854 - - - 336

64

(IX) Internal control system related to measurement of fair value

1. Internal control system related to measurement of fair value

In accordance with the requirements of the Accounting Standards for Business Enterprises, the Company set

up an internal management system to standardize the measurement of the fair value of financial instruments.

The measurement of the fair value adopted by the Company in accounting was determined based on the

active level of the products and the maturity of the internal valuation model. For financial instruments that

had active market quotation, the fair value would be measured on the basis of active market quotation. For

financial instruments that had no active market quotation but had a mature internal model, the fair value would

be measured on the basis of internal model pricing. For financial instruments that had neither active market

quotation nor mature internal pricing model, the fair value would be measured on the basis of prices quoted

by a trading counterparty, or determined with reference to the valuation results provided by an authoritative,

independent, professional third party valuation agency. The measurement of fair value of financial instruments

traded by the Company was primarily based on the active market quotation.

2. Items related to measurement of fair value

Unit: RMB million

ItemDecember

31, 2012

Gains and losses in the period from

changes in fair value

Accumulated changes in fair

value recognized in equity

Provision for impairment

made in the period

December 31, 2013

Held-for-trading financial assets 21,540 (595) - - 42,295

Precious metals 4,976 163 - - 276

Derivative financial assets 3,266(722)

- - 6,414

Derivative financial liabilities 2,996 - - 6,864

Available-for-sale financial assets 192,057 - (6,144) - 263,681

Held-for-trading financial liabilities - 12 - - 1,216

65

(X) Changes in on/off-balance-sheet interest receivable

Unit: RMB million

Item December 31, 2013Increase in the

reporting periodRecovery in the reporting period

December 31, 2012

Interest receivable 23,249 189,602 185,888 19,535

As at the end of the reporting period, the interest receivable increased by RMB3.714 billion or 19.01% from

the beginning of the period, mainly because of the increase in interest-bearing assets. Interest receivable from

interest-bearing assets not recovered within 90 days after expiration would be written down from the interest

receivable in the current period and checked as off-balance-sheet item. Therefore, no bad debt provision was

made.

(XI) Provision for impairment of other receivables

Unit: RMB million

ItemDecember

31, 2013December 31,

2012Provision for

impairmentProvision method

Other receivables 3,566 2,611 209

At the end o f the per iod , ind iv idua l and collective tests were done to other receivables to make provision for impairment in combination with account age analysis

(XII) Off-balance-sheet items that may cause major impact on the financial position and operating results

Unit: RMB million

Item December 31, 2013 December 31, 2012

Letters of credit 129,383 69,233

Letters of guarantee 53,152 25,429

Bank acceptance 452,710 392,352

Unused credit card commitments 41,341 6,450

Reimbursement refinances - 50,004

66

(XIII) Risks and risk management during the reporting period

During the reporting period, facing the complicated and severe internal and external situation, the Company

further improved the risk management system in all aspects, constantly made endeavors to become more

comprehensive and more efficient in risk management and control, enhanced the research of industrial

and regional risks, reinforced the management on major industries to be granted credit and uniform credit,

stressed on the examination and rectification of key risks, continuously innovated and optimized management

tools, and effectively boosted the development and application of risk measuring instruments. It also stably

carried forward the implementation of new capital accord projects, continued to improve management of the

internal rating system for non-retail business, advocated the compliance culture, stuck to the bottom line of

risks, promoted investigation and prevention simultaneously, and strengthened the prevention and control

of operating risks and case risks, hence becoming more professional in risk management, more efficient

in regulation and more sensitive to the market, and maintaining sustainable and healthy development in all

businesses.

1. Optimizing risk management systems and mechanism, and boosting operating efficiency

Firstly, by implementing internal control management appraisal on risks and compliance of branches, the

Company guided branches to practically perform their duties and comprehensively promoted the management

level of risks and internal control compliance of operating units. The Company formulated the Measures for

the Comprehensive Assessment of Risk Management of Branches with the assessment results serving as

an important basis for the authorization of credit business to branches. It also worked out the Measures for

the Comprehensive Assessment of Compliance Operation and Internal Control of Branches as an important

part of the appraisal of operating performance of branches. Secondly, it reinforced the assessment of risk

management of business lines. The Company further improved the assessment plan of relevant personnel

including chief business line risk supervisor and the business line risk management department, highlighted

the process assessment, consolidated the inspection and supervision on duty performance of the embedded

risk management team of business lines, and guaranteed the implementation of all the risk policies. Thirdly,

the meeting mechanism was completed. The risk management committee shouldered the responsibility to

examine risk management policies, and the monthly regular meeting for risk management of the Head Office

and the joint conference for risk management would stress on the solving of problems encountered in actual

execution of declared policies.

2. Credit risk management

The Company’s credit risk management objectives were: establishing and continuously improving the credit

risk management system, promoting the specialization level and refinement degree of credit risk management,

optimizing the orientation of credit granting and customer structure, constantly reinforcing risk management

and control on the overall credit business process, realizing the balance between risks and gains, and

effectively controlling risks.

The Company continued to deepen and detail the credit risk management work, thus maintaining good asset

quality. Firstly, according to the changes of internal and external situations, the Company properly adjusted

the approval and authorization of credit business, and further standardized the review and approval process

of credit projects. Secondly, focusing on the purpose of servicing the real economy, the Company accurately

seized the credit layout of mainstream businesses, reasonably worked out annual credit granting policies,

effectively carried out limit management and enhanced the ability to identify, manage and control customer

risks. Fourthly, the Company laid stress on the early warning and examination of industrial and regional risks

and risks in key areas, strengthened the management of overdue loans and reinforced the collection of non-

performing assets and the accountability investigation thereof.

67

3. Management of liquidity risk

The Company’s objectives for management of liquidity risk were: firstly, ensuring the demand of payment;

secondly, improving the application efficiency of funds and guaranteeing the rapid and healthy development of

all businesses; and thirdly, realizing the unification of “security, liquidity and profitability”.

According to changes of the external economic and financial situation, the Company prospectively adjusted

the liquidity preference and management strategies, put more efforts on the management and control,

constantly optimized and adjusted the liquidity management mechanism and methods, and effectively

prevented liquidity risks. The specific measures included: setting asset-liability ratio index for each business

line to ensure the balanced development between assets and liabilities of each business line; controlling

capital source and the amount and term structure of application of funds through the guidance of funds

transfer pricing (FTP); reasonably controlling the capital growth rate and enhancing credit line management;

promoting the development of core liability business to stabilize the liability recourses through multiple

channels; setting targets like the daily average loan-to-deposit ratio to the operation units, and reinforcing the

liquidity management by combining the head office and all branches as well as coordinating all departments

in the head office; upgrading and improving the liquidity management system such as asset-liability system

and position management system to improve the liquidity management techniques; and regularly conducting

liquidity stress testing and revising the liquidity contingency plan to enhance the ability of risk identification,

monitoring and control.

Unit: %

Regulation Value December 31, 2013 December 31, 2012

RMB excess reserve ratio - 3.54 5.83

Liquidity ratio (RMB) ≥25 34.80 29.06

Loan-to-deposit ratio ≤75 61.95 66.50

4. Market risk management

The Company’s market risk management was for the purposes of: firstly, establishing and continuously

improving market risk management system which matched with the risk management strategies, and satisfied

standard requirements of the new capital accord and regulatory requirements of market risk; secondly,

completing market risk management structure, policies, processes and methods; and thirdly, promoting the

specialization level of market risk management, realizing centralized and unified management of market risks,

and facilitating the sustainable and healthy development of relevant businesses with risks under control.

The Company established a complete basic market risk management framework in terms of organizational

system construction, risk limit indicator system, basic risk management policies and strategies, reinforced

the investment decision-making management and interest-sensitive gap management, and effectively

prevented interest rate and exchange rate risks. It strengthened the management and control of interest

rate risks, controlled market risks within a reasonable range through effective market risk management and

control measures, and realized the maximum benefits. At the same time, together with market risk stress

testing and other methods, the Company evaluated the risks confronted by it under extreme conditions to

provide reference for the control of market risks. In respect of system construction, the Company continued

to strengthen the building of the capital trading and analysis system (Murex) so that it could cover more new

products and new businesses.

(1) Interest rate risk

According to changes of the market situation, the Company flexibly adjusted the interest rate risk management

measures and made sure the interest rate risks were under control. To effectively cope with the complicated

and changeable economic situation at home and abroad as well as the intensified market interest rate

68

fluctuations due to the tight liquidity, the Company guided branches to adjust the efforts on the expansion

of long-term fund sources at appropriate time based on the state macroeconomic policies, reinforced the

management on the matching of interbank capital business, and increased the management on spread

between the cost of capital source and gains from application of funds. At the same time, the Company

made full use of the hedging of interest rate among different products in the financial derivatives market,

and effectively controlled the interest rate risks. It also improved the pricing and valuation models, formed

standard process for pricing and valuation management and promoted the dynamic valuation level of held-

for-investment products. Through constantly improving the market risk indicator limit system, it set limits for

various risk exposures and the stop-loss limits respectively for different trading products, and distributed

them in such forms as annual business letter of authorization and regular investment strategy plan for

implementation.

(2) Exchange rate risk

The Company had centralized management on exchange rate risks. All the branches collected exchange rate

exposures formed in various businesses to the Financial Markets of the Head Office via relevant systems, and

the Financial Markets gave full play to the system’s support function to risk control, made use of the capital

trading and analysis system to have management on foreign exchange risks in terms of currency and time

period, and made sure that the foreign exchange exposure accorded with limits like the daytime proprietary

exposure limit and end-of-day exposure limit so that the foreign exchange risks were always controlled within

a reasonable range.

5. Management of operating risks

The Company initiated and carried out the operating risk project and the management integration project of

compliance, internal control and operating risk, launched investigation and research on interbank and external

companies according to relevant regulatory requirements for implementing new capital accord, referred to

good practices of interbank at home, and designed a suitable implementation program for the operating risk

project and the management integration project of compliance, internal control and operating risk, covering

such contents as basic policies for operating risks, application of management tools, capital measurement,

outsourcing risk management and business continuity management, and etc. During the reporting period, the

Company continued to carry out the collection of operating risk loss data, providing data accumulation for

the implementation of advanced measurement approach for operating risks in the future; selected branches

to carry out the pilot work for application of operating risk management tools on key businesses, and

proposed management suggestions on basis of the pilot results, thus laying a foundation for the preparation

of the project implementation program; reinforced the building of case prevention and control system and

special examination activities, took the lead in deploying investigation of risks regarding all kinds of cases,

strengthened implementation of the “thirteen articles” against operating risks and promoted the prevention and

control level in all cases, hence achieving the objectives of “zero criminal case” and “zero major operating risk

incident”.

6. Compliance risk management

Through reinforcing the construction of compliance culture and deepening the concept of compliance

operation, the Company further promoted effective implementation of compliance management and facilitated

the healthy and sustainable development in its businesses. Firstly, it effectively carried out performance

appraisal on compliance and internal control and promoted initiative compliance. While optimizing and

completing the compliance operation of branches and business departments of the Head Office and the

performance appraisal program for internal control, the Company increased the weight of internal control

compliance indicators, completed the setting of indicators, and reinforced the collection and sharing of

appraisal information on IT platform, thus effectively carrying out appraisal and guiding institutions to

standardize the operation for fair competition. Secondly, it reinforced the system management, laying a

69

solid foundation for compliance management over internal control. The Company continued to advance the

standardization of system management work, unified the release channels and inquiry platform of systems,

strengthened the legal and compliance review before release of systems, and enhanced the completeness and

operability of system processes; it established the post systems evaluation mechanism, continued to review

and sort systems, constantly boosted the compliance, systematicness and dynamism of system construction,

thus laying a firm foundation for internal control and compliance management. Thirdly, the Company improved

the internal supervision mechanism, guaranteeing the steady launch of all businesses. It further standardized

the working process for review of internal control, intensified the data inspection management, reinforced the

long-term mechanism of inspection management on internal control, and completed the internal supervision

system. According to changes of the legal environment and regulatory focus, the Company gave compliance

risk hints at appropriate time, pointed out legal compliance risks existing in business development in a

timely manner, and provided opinions for prevention. Fourthly, the Company laid stress on the construction

of compliance culture and strengthened the awareness of compliance operation. It further intensified the

construction of compliance culture and effectively carried out the compliance culture through such measures

as improving relevant systems for employee behavior management, completing the compliance management

mechanism and framework for branches, enriching the personnel allocation for legal compliance management

and enhancing various compliance examinations and compliance training, and etc. Fifthly, the Company took

the initiative in boosting the transformation of the “risk-oriented” anti-money laundering strategy, completed

each working mechanism, consolidated the appraisal management of anti-money laundering, propelled the

implementation of the risk assessment over anti-money laundering and terrorist financing and the classification

of customer risks, deeply explored the design of autonomous monitoring index over unusual transactions, and

organized and conducted upgrade and transformation of the anti-money laundering system, with the overall

anti-money laundering level being effectively promoted.

7. IT risk management

The Company continued to reinforce its IT risk management, built and improved the long-term mechanism for

IT risk management. Through system construction and restructuring, it advanced the construction of IT risk

management systems and realized sustainable tracking and monitoring of IT risks by means of regular IT risk

monitoring, warning and disposal mechanisms. It constantly improved the IT risk assessment and reporting,

strengthened the management and control of IT risks in key areas, and meanwhile, reinforced the business

continuity management, carried out drilling on switches between the host and the backup machine for core

business systems, initiated building of the disaster recovery system for branches, and thus provided safeguard

for continuous and stable operation of businesses. Meanwhile, the Company boosted the prevention and

control with information security technologies, reinforced the IT risk management at branches, and hence

improved the IT risk management level.

8. Management of reputation and country risks

(1) Management of reputation risks

The Company’s management of reputation risks was for the purpose of: actively and effectively preventing

reputation risks and coping with reputation incidents, and reducing the losses and adverse impacts caused to

the Company and the public to the minimum level.

During the reporting period, the Company formulated the Sub-strategies of Reputation Risk Management and

the Reputation Risk Management System, incorporated the reputation risk management into the Company’s

governance and comprehensive risk management system, clarified functions of different levels and divisions,

adopted hierarchical classification management, and thus reinforced the effective prevention and control of

reputation risks. It also attached importance to the initiative prevention against reputation risks, established

corresponding management modes and working mechanisms regarding daily monitoring of public opinions,

customer complaint and information disclosure, and immediately initiated corresponding contingency plan for

70

reputation incidents. Besides, the Company incorporated reputation risk management into the comprehensive

appraisal of branches in terms of risk management, compliance operation and internal control, effectively

facilitating and reinforcing the reputation risk management at basic operating units.

(2) Management of country risks

The Company’s management of country risks was for the purpose of: establishing and continuously improving

the Company’s country risk management system based on its internationalized process and business

growth, adopting proper measurement, assessment and rating system for such risk with a view to accurately

identifying and assessing country risks relating to business activities and promoting sustainable and healthy

development of its business.

According to regulatory requirements and the practical situation, the Company formulated the Sub-strategies

of Country Risk Management and the Measures for the Management of Country Risks, incorporated

the country risk into the Company’s comprehensive risk management system, clarified the country risk

management framework and division of responsibilities, reviewed the business process, worked out policies

for provision of country risks, and carried out scientific management.

IV. Active performance of social responsibilities The Company has disclosed its 2013 Annual Sustainability Report. For the full text of the report, please visit

the websites of Shanghai Stock Exchange and the Company.

V. Profit distribution

(I) Formulation, implementation or adjustment of the cash dividend policy

The Company considered and passed the amendments to the articles of association at the first extraordinary

general meeting in 2012, which stated that the profit distribution policy should include: first, the procedures for

formulation and adjustment of the profit distribution policy, which specifically required that such policy should

not be submitted to the general shareholders’ meeting unless consents of more than two thirds of directors

were obtained and should not be passed unless more than two thirds of votes were obtained from present

shareholders with voting rights; second, the principles of continuity and stability of profit distribution, which

required that the profit distribution plan should be drafted every three years; third, profit distribution form (in

cash or equity or both of them) and interval (annually or semi-annually if affordable); fourth, the profit for

distribution in cash yearly not less than 10% of the realized attributable profit of the year, provided that the

requirements on capital adequacy ratio were met; distributing dividend in equity at the same time if necessary;

fifth, explanations for the non-distribution of dividends and the purpose of reserves not for dividend distribution

if cash dividends are not distributed for the year; and sixth, deduction of the cash dividends distributable to

any shareholder to repay the funds he used, where the shareholder used funds in violation of regulations.

For the purpose of establishing a sustainable, stable and scientific investment return mechanism for investors

and keeping continuity and stability of the profit distribution policy, by taking into consideration of its actual

operation and future development need, the first extraordinary general meeting of the Company adopted the

Profit Distribution Plan 2012-2014 (for details, please refer to the announcement of the resolutions of the

general meeting dated August 29, 2012), which planned that in the coming three years (2012-2014), the profit

used for distribution in cash would not be less than 20% (including 20%) of the realized attributable profit of

the year where there were attributable profit after recovery of deficit and appropriation of statutory reserves

and general provisions from the realized earnings, provided that the regulatory requirements on capital

adequacy ratio were met.

71

The Company fulfilled the aforesaid undertaking on schedule. According to the annual profit distribution plan

2012 approved by the general meeting on May 21, 2013, based on the total shares of 12,701,557,834, the

Company distributed 5 bonus shares and cash dividend of RMB5.7 for every 10 shares (tax included) to all

shareholders, with total cash dividend distributed amounting to RMB7.240 billion, accounting for 20.85% of

the net profit attributable to the shareholders of the parent company. The total share capital after issuance of

bonus shares was 19,052,336,751, increasing by 6,350,778,917 shares. The formulation and implementation

procedures of the Company’s cash dividend policy were compliant and transparent with clear and explicit

dividend criteria and proportion, conforming to stipulations in the articles of association and requirements in

the resolution of the general meeting. The board of directors did special research and demonstration on the

returns of shareholders, and fully heard opinions of shareholders (especially medium and small shareholders)

and independent directors. Relevant decision-making process and mechanism were complete, and

independent directors fulfilled their duties with due diligence, thus maintaining the lawful rights and interests of

medium and small shareholders.

(II) Profit distribution plan 2013

In light of relevant provisions in the Company Law of the People’s Republic of China, the Articles of

Association of the Company as well as the Profit Distribution Plan 2012-2014, by taking into consideration

of the requirements on capital adequacy ratio by the regulatory departments and other factors including

sustainable business development, the Company planned to transfer RMB3,175,389,458.50 to statutory

surplus reserve, after that the statutory surplus reserve exceeded 50% of the registered capital. The Company

also planned to transfer RMB2,402,146,465.25 to general reserve, and to distribute cash dividend of RMB4.6

for every 10 shares (tax included), amounting to RMB8,764,074,905.46, based on the total share capital of

19,052,336,751 shares. The remaining undistributed earnings will be carried forward to the next year.

This plan shall be executed within two months after approval by the annual general meeting 2013.

(III) Plan or pre-plan on profit distribution of the previous three years

Unit: RMB million

Year

Number of bonus

shares for every 10

shares (tax incl.)

Number of dividends for

every 10 shares(RMB)

(tax incl.)

Number of shares

converted by capital

reserve for every 10

shares

Amount of cash

dividends (tax incl.)

Net profit attributable to the shareholders

of the listed company in the consolidated

financial statements for the year

Percentage of net profit attributable to the shareholders of the listed company in the consolidated

financial statements for the year (%)

2013 - 4.60 - 8,764 41,211 21.27

2012 5 5.70 - 7,240 34,718 20.85

2011 - 3.70 - 3,991 25,505 15.65

72

SIGnIFICant ISSueS

I. Material lawsuits, arbitrations and issues questioned by mediaDuring the reporting period, there was neither material lawsuit nor arbitration against the Company that was

required to be disclosed nor issues broadly questioned by media.

II. Material asset transactionsDuring the reporting period, there was no material acquisition and sale of assets or M&A.

III. Material related party transactionsDuring the reporting period, material related party transactions involving transactions with related legal

persons amounting to over RMB3,000,000 and accounting for more than 0.5% of the latest audited net asset

value of the Company were as follows:

(I) The Company’s 18th meeting of the 7th session of the board of directors approved the Proposal concerning

Granting of an Internal Basic Credit Line to Hang Seng Bank (including Hang Seng Bank (China) Limited),

agreeing to extend an internal basic credit line of RMB3 billion to Hang Seng Bank (including Hang Seng

Bank (China) Limited), with a term of one year. The type of business under the credit extension was subject

to the types of credit businesses the Company took for credit risks of the credit receiver (excluding buy-

back credit asset transfer business). The above-mentioned related party transactions arose from the needs

of the due course of business activities, and the conditions and interest rates of the transactions complied

with the Company’s general provisions for business management. For details, please refer to the Company’s

announcement dated April 23, 2013.

(II) The Company’s 20th meeting of the 7th session of the board of directors approved the Proposal concerning

Granting of Related Party Transaction Line to The People’s Insurance Company (Group) of China Limited,

agreeing to extend an internal basic credit line of RMB5 billion to The People’s Insurance Company (Group)

of China Limited and its subsidiaries (hereinafter referred to as “PICC related legal persons”), with a term of

one year. The type of businesses under the credit extension are financial bond, subordinated debt investment,

RMB interbank borrowing, bond repurchase and other business types the Company took for credit risks of

the credit receiver. The Company also agreed to extend non-credit related transaction line to PICC related

legal persons, with a term of one year. The type of businesses covering fund market transaction, financial

consultant and asset management, financial management, comprehensive service and other businesses. The

above-mentioned related party transactions arose from the needs of the due course of business activities,

with transaction conditions not superior to similar transactions with un-related parties and fair price. Besides,

they conformed to relevant provisions of related laws, regulations, stipulations and regulatory system, and the

transaction payment mode and time were determined as per business practice. For details, please refer to the

Company’s announcement dated September 28, 2013.

As at the end of the reporting period, the balance and risk exposure (excluding deposits from related natural

persons) of the Company’s related party transactions with related natural persons was RMB10 million.

Please refer to “Related party relationships and transactions” under the Notes to the Financial Statements for

further details on other related party transactions.

73

IV. Material contracts and performance thereof

(I) Material custody, lease and undertaking issues

During the reporting period, the Company had no material custody, lease and undertaking issues.

(II) Material guarantees

During the reporting period, excluding normal financial guarantees within the approved business scope, the

Company had no other material guarantees requiring disclosure.

(III) Entrusting others with significant cash assets management

During the reporting period, the Company did not entrust significant cash assets management to other parties.

(IV) Other material contracts

During the reporting period, the Company performed its contracts under normal circumstances and no material

contractual disputes occurred.

V. External guaranteeIn accordance with the relevant provisions of CSRC, the Company carefully verified its guarantee to external

parties in 2013. The Company’s external guarantee business was approved by PBOC and CBRC and it was

part of the Company’s regular business operations. As at the end of the reporting period, the balance of the

Company’s guarantee business was RMB53.152 billion. No advances were made under the Company’s

guarantee business, and no illegal guarantee besides the normal guarantee business was discovered.

The Company always adhered to the principal of prudence when conducting its external guarantee business,

and at the same time, it strengthened risk monitoring and management of off-balance businesses by issuing

risk warnings in a timely manner and putting preventive measures in place. During the reporting period, under

the effective supervision and management of the board of directors, the Company’s guarantee business

operated normally and risk concerned was under control.

VI. Performance of undertakings(I) The first extraordinary general meeting of the Company adopted the Profit Distribution Plan 2012-2014 (for

details, please refer to the announcement of the resolutions of the general meeting dated August 29, 2012),

which planned that in the coming three years (2012-2014), the profit used for distribution in cash would not

be less than 20% (including 20%) of the realized attributable profit of the year where there were attributable

profit after recovery of deficit and appropriation of statutory reserves and general provisions from the realized

earnings, provided that the regulatory requirements on capital adequacy ratio were met. The Company fulfilled

the aforesaid undertaking on schedule.

(II) The Company’s shareholders, namely The People’s Insurance Company (Group) of China Limited, PICC

Property and Casualty Company Limited and PICC Life Insurance Company Limited (collectively holding

10.87% of the total share capital of the Company) undertook that the non-publicly offered shares of the

Company they subscribed for in 2012 were subject to restricted trade for 36 months, which could not be

74

transferred within 36 months from the day when the offering was completed, except otherwise required by the

competent regulators on the lock-up period. The above-mentioned companies performed their obligations and

the shares concerned were registered for restricted transactions.

(III) The Company’s shareholders, namely China National Tobacco Corporation and Shanghai Zheng

Yang International Business Co., Ltd., holding 3.22% and 0.99% of the total share capital of the Company

respectively, undertook that the non-publicly offered shares of the Company they subscribed in 2012 were

subject to restricted trade for 36 months, which could not be transferred within 36 months from the day when

the offering was completed. The above-mentioned companies performed their obligations and the shares

concerned were registered for restricted transaction.

The Company and its shareholders holding over 5% of the Company’s shares made no other undertakings

during the reporting period or undertakings that lasted into the reporting period.

VII. Appointment of accounting firms and sponsorsUpon approval of the annual general meeting 2012, Deloitte Touche Tohmatsu Certified Public Accountants

LLP was appointed to audit the annual report 2013, review the semi-annual report 2013 and provide internal

control and audit services with the total audit fee amounting to RMB7.7 million, which included fees and

expenses concerning traffic, accommodation, stationery, communication and printing as well as related taxes,

with RMB6.4 million for financial statement audit and review, and RMB1.3 million for internal control. Currently,

Deloitte Touche Tohmatsu Certified Public Accountants LLP has provided audit services to the Company for

consecutive three years.

Credit Suisse Founder Securities Limited served as the sponsor of the Non-public Offering of the Company in

2012, with the sponsorship fee of RMB12 million.

VIII. Punitive actions against the Company, and its directors, supervisors and senior management personnelDuring the reporting period, no instances of inspections, administrative penalties, banning of entry into the

securities market, notice of criticism, identification as an inappropriate candidate or public censure was

taken by securities regulatory authorities against the Company, and its directors, supervisors and senior

management personnel, and no other penalties that materially affected the company’s operations were

incurred by the Company by other regulatory authorities.

IX. Description of other major issues Establishment of CIB Fund Management Company and changes in scope of the consolidated statements:

during the reporting period, the Company, together with China Shipping Investment Co., Ltd., jointly set up

CIB Fund Management Co., Ltd. with registered capital of RMB500 million, of which, the Company contributed

RMB450 million and China Shipping Investment Co., Ltd. contributed RMB50 million. Since the business

registration formalities of CIB Fund Management Co., Ltd. were handled in April 2013, according to relevant

provisions in the Accounting Standards for Business Enterprises, CIB Fund Management Co., Ltd. was

included in the Company’s consolidated financial statements in this period.

During the reporting period, Industrial Trust established a wholly-owned subsidiary China Industrial Asset

Management Limited with registered capital of RMB100 million, and CIB Fund Management Company set up a

wholly-owned subsidiary CIB Wealth Management Co., Ltd. with registered capital of RMB200 million, both of

the two new subsidiaries were included in the Company’s consolidated financial statements in this period.

75

ShaRe CaPItaL ChanGeS anD ShaRehoLDeRS

I. Changes in shares during the reporting period

(I) Changes in shares

1. The statement of changes in shares

Unit: share

　

Before the change Changes during the reporting period After the change

NumberPercen-tage (%)

Non-public offering

Bonus share Sub-total NumberPercent-age (%)

I. Restricted shares

1. State-owned shares 0 0 0 0 0 0 0

2. Shares held by state- owned legal entities

0 0 1,789,459,400 894,729,700 2,684,189,100 2,684,189,100 14.09

3. Shares held by other domestic investors

0 0 125,687,300 62,843,650 188,530,950 188,530,950 0.99

Incl: Shares held by domestic non-state- owned legal persons

0 0 125,687,300 62,843,650 188,530,950 188,530,950 0.99

Shares held by domestic natural persons

0 0 0 0 0 0 0

4. Shares held by foreign investor

0 0 0 0 0 0 0

Incl: Shares held by foreign legal persons

0 0 0 0 0 0 0

Shares held by foreign natural persons

0 0 0 0 0 0 0

total 0 0 1,915,146,700 957,573,350 2,872,720,050 2,872,720,050 15.08

II. Unrestricted floating shares

1. RMB ordinary shares 10,786,411,134 100 0 5,393,205,567 5,393,205,567 16,179,616,701 84.92

2. Domestically listed foreign shares

0 0 0 0 0 0 0

3. Overseas listed foreign shares

0 0 0 0 0 0 0

4. Others 0 0 0 0 0 0 0

total 10,786,411,134 100 0 5,393,205,567 5,393,205,567 16,179,616,701 84.92

III. total shares 10,786,411,134 100 1,915,146,700 6,350,778,917 8,265,925,617 19,052,336,751 100

2. Upon approval by CSRC, works relating to collection of the payment for subscription for the Non-public

Offering of A-shares of the Company as well as capital verification were finished on December 31, 2012 and

the total share capital of the Company changed to RMB12,701,557,834. The procedures and formalities for

custodian and registration of the newly offered shares were completed on January 7, 2013. Data in the column

“Before the change” above were data before the Non-public Offering.

76

According to the annual profit distribution plan 2012 approved by the general meeting in 2012, based on the

total shares of 12,701,557,834, the Company distributed 5 bonus shares and cash dividend of RMB5.7 for

every 10 shares (tax included) to all registered shareholders as of the equity registration date (July 2, 2013)

with total shares changing into 19,052,336,751, increasing by 6,350,778,917 shares. The newly increased

unrestricted floating shares were circulated in the market on July 4, 2013.

3. Impact of changes in shares on such financial indicators as earnings per share and net assets per share for

the latest year and the latest reporting period

Works relating to collection of the payment for subscription for the non-publicly offered shares of the Company

as well as capital verification were completed on December 31, 2012. After the offering expenses were

deducted, the net amount of the actual proceeds raised reached RMB23.532 billion, of which, the amount

equal to RMB1,915,146,700 was recorded in equity and the remaining was in capital reserve. At the end of

2012, net assets in net assets per share attributable to the shareholders of the parent company included the

proceeds raised via the Non-public Offering and the total share capital stood for share capital after the Non-

public Offering. In accordance with the No. 9 Rule for the Preparation and Reporting of Information Disclosure

of Companies with Public Offering – the Calculation and Disclosure of ROE and EPS (revised in 2010) issued

by CSRC, the said share capital and proceeds raised in December 2012 would be included in the calculation

of the basic EPS and average weighted ROE from January 2013.

The Company implemented the profit distribution plan of distributing 5 bonus shares for every 10 shares to all

shareholders in July 2013 with the total shares increasing to 19,052,336,751, and the EPS indicators in 2012,

2011 and each comparison period had been recalculated as per the new share capital after issuance of bonus

shares according to the No. 9 Rule for the Preparation and Reporting of Information Disclosure of Companies

with Public Offering – the Calculation and Disclosure of ROE and EPS (revised in 2010) issued by CSRC. The

net assets per share attributable to the shareholders of the parent company at the beginning of the period

were not adjusted as per the new share capital after issuance of bonus shares.

77

(II) Changes in restricted shares

Unit: share

Name of shareholders

Number of restricted

shares at the

beginning of the

period

Number of shares released

from restrictions

Number of restricted shares increased in the

period

Number of restricted

shares with at the end of the

period

Reasons ofrestrictions

Date of release

from restrictions

The People’s Insurance Company (Group) of China Limited

0 0 174,651,600 174,651,600

Under-takings on

the lock-up period of

non-public offering

January 7, 2016

PICC Property and Casualty Company Limited-traditional- common insurance product -008C-CT001 Hu

0 0 948,000,000 948,000,000

PICC Life Insurance Company Limited-participating-personal insurance (participating)

0 0 474,000,000 474,000,000

PICC Life Insurance Company Limited-universal-personal insurance (universal)

0 0 474,000,000 474,000,000

China National Tobacco Corporation

0 0 613,537,500 613,537,500

Shanghai Zheng Yang International Business Co., Ltd.

0 0 188,530,950 188,530,950

total 0 0 2,872,720,050 2,872,720,050 - -

Note: The aforesaid restricted shares were non-publicly offered shares by the Company in 2012 and the procedures and

formalities for registration and custodian of the non-publicly offered shares were handled with the Shanghai Branch of

China Securities Depository and Clearing Corporation Limited in January 7, 2013. These shares could not be transferred

within 36 months from the date when the offering was completed, except otherwise required by the competent regulators

on the lock-up period.

II. Issuance and listing of securities

(I) Issuance of securities in the past three years

Type Issue dateIssue price

(RMB)

Issue quantity (share)

Listing dateApproved volume of

listing (share)

Expiry date of

transaction

RMB ordinary shares

December 31, 2012 12.36 1,915,146,700 January 7, 2016 2,872,720,050 N/A

Note: 1,915,146,700 shares were issued at the Non-public Offering in 2012 and the Company’s total shares increased to

2,872,720,050 after implementing the annual profit distribution plan of distributing 5 bonus shares for every 10 shares.

78

(II) Changes in total shares, shareholders structure and structure of assets and liabilities

After the Non-public Offering in 2012, the Company’s total shares increased to 12,701,557,834 shares. In July

2013, the Company implemented the profit distribution plan of distributing 5 bonus shares for every 10 shares

to all shareholders and the total shares further increased to 19,052,336,751. As at the end of the reporting

period, the shareholders’ equity attributable to the shareholders of the parent company reached RMB199.769

billion, up 17.80% from the beginning of the period.

(III) The Company had no employee stocks.

III. Shareholders

(I) Total number of shareholders

As at the end of the reporting period, the Company had a total of 277,748 shareholder accounts, and 296,876

shareholders accounts at the end of the fifth trading day prior to the release of this annual report.

79

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80

(III) Shareholdings of the top ten shareholders of unrestricted shares

Unit: share

Name of shareholdersNumber of

unrestricted sharesPercentage in total

share capital (%)Type of shares

Finance Bureau of Fujian Province 3,402,173,769 17.86 RMB ordinary shares

Hang Seng Bank Limited 2,070,651,600 10.87 RMB ordinary shares

Fujian Tobacco Haisheng Investment Management Co., Ltd.

441,504,000 2.32 RMB ordinary shares

Tetrad Ventures Pte Ltd. 248,054,400 1.30 RMB ordinary shares

China Tobacco Hunan Investment Management Co., Ltd.

226,800,000 1.19 RMB ordinary shares

Longyan Municipal Bureau of Finance, Fujian Province 218,636,350 1.15 RMB ordinary shares

Inner Mongolia Xishui Venture Co., Ltd. 132,973,103 0.70 RMB ordinary shares

International Finance Corporation 131,003,754 0.69 RMB ordinary shares

Zhejiang Southeast Electric Power Company Limited 118,260,000 0.62 RMB ordinary shares

China Life Insurance Company Limited -participating-personal insurance (participating)- 005L- FH002 Hu

108,344,894 0.57 RMB ordinary shares

Note: Fujian Tobacco Haisheng Investment Management Co., Ltd. and China Tobacco Hunan Investment Management Co., Ltd.

were subsidiaries of China National Tobacco Corporation.

(IV) Number and conditions of restricted shares held by shareholders

Unit: share

Name of shareholders holding restricted shares

Number ofrestricted

shares

Listing and trading of restricted shares

Restriction conditionsTime for listingand trading

Number of additional shares

available for listing and trading

The People’s Insurance Company (Group) of China Limited

174,651,600

January 7, 2016

174,651,600

Not transferable within 36 months from the day when the offering was finished (except otherwise requi red b y t h e c o m p e t e n t regulators on the lock-up period)

PICC Property and Casualty Company Limited-traditional-common insurance product-008C-CT001 Hu

948,000,000 948,000,000

PICC Life Insurance Company Limited-participating-personal insurance (participating)

474,000,000 474,000,000

PICC Life Insurance Company Limited-universal-personal insurance (universal)

474,000,000 474,000,000

China National Tobacco Corporation 613,537,500 613,537,500 Not transferable within 36 months from the day when the offering was finished

Shanghai Zheng Yang International Business Co., Ltd. 188,530,950 188,530,950

Description for related relationship or acting in concert of shareholders

PICC Property and Casualty Company Limited and PICC Life Insurance Company Limited were subsidiaries of The People’s Insurance Company (Group) of China Limited.

81

(V) The Company has no controlling shareholder or actual controller and its largest shareholder is the Finance Bureau of Fujian Province. Shareholders holding over 10% of the Company’s shares are as follows:

1. The Finance Bureau of Fujian Province is a legal person of government unit. Its legal representative is Chen

Xiaoping and the address is 5 Zhongshan Road, Fuzhou. It is the largest shareholder of the Company, holding

17.86% of the Company’s shares.

2. Hang Seng Bank Limited was established in 1933 and now it is one of the largest listed banks by market

capitalization in Hong Kong. Its legal representative is Rose Lee; the registered capital is HKD 9.56 billion; and

the legal address is 83 Des Voeux Road, Central, Hong Kong. Hang Seng Bank is one of the major members

of the HSBC Group, which indirectly held 62.14% stake in Hang Seng Bank through its holding subsidiaries. In

May 2007, Hang Seng Bank established Hang Seng Bank (China) Limited, its wholly-owned subsidiary, in the

mainland China.

3. The People’s Insurance Company (Group) of China Limited, PICC Property and Casualty Company Limited

and PICC Life Insurance Company Limited: the People’s Insurance Company (Group) of China Limited, PICC

Property and Casualty Company Limited and PICC Life Insurance Company Limited collectively held 10.87%

of the Company’s shares, and PICC Property and Casualty Company Limited and PICC Life Insurance

Company Limited were subsidiaries of The People’s Insurance Company (Group) of China Limited.

The People’s Insurance Company (Group) of China Limited is a comprehensive insurance (financial) company

(organizational code: 10002373-6), incorporated in 1996. Its precedent was the People’s Insurance Company

of China established in 1949 upon approval of the Government Administration Council of China. As at the

end of the reporting period, it had registered capital of RMB42.424 billion, whose legal representative was

Wu Yan and registered office was in Beijing. Its business includes: investment in and holding of shares of

listed companies, insurance institutions and other financial institutions; and supervision and management of

domestic and overseas businesses of its holding ventures. It was listed on the Hong Kong Stock Exchange in

December 2012.

PICC Property and Casualty Company Limited (organizational code: 71093148-3) was established in 2003

and listed on the Hong Kong Stock Exchange in the same year. It has registered capital of RMB13.604 billion,

whose legal representative is Wu Yan and registered office is in Chaoyang District, Beijing. Its business covers

all types of property insurance, including motor vehicle, property, marine, credit, accident, energy, aerospace

and agricultural insurances. Now, it is the largest property insurance company in China.

PICC Life Insurance Company Limited (organizational code: 71093370-2) is a national life insurance company.

Established in 2005, it has registered capital of RMB25.761 billion, whose legal representative is Wu Yan and

registered office is in Haidian District, Beijing. Its business includes: life insurance, health insurance, accident

insurance, personal reinsurance and investment.

82

I. Directors, supervisors and senior management members

(I) General information

Name Title GenderDate of

BirthTenure

Total remuneration from the Company during the reporting period (pretax) (in RMB ten thousand)

Gao JianpingChairman of the board of

directorsMale 1959.07 2013.10.15-2016.10.14 361.5

Liao Shizhong Director Male 1962.10 2013.10.15-2016.10.14 0

Andrew H C Fung Director Male 1957.07 2013.10.15-2016.10.14 0

Li Liangwen Director Male 1951.10 2013.12.24-2016.10.14 0

Zhang Yuxia Director Female 1955.06 2013.12.24-2016.10.14 0

Chua Phuay Hee Director Male 1953.09 2013.10.15-2016.10.14 0

Li Renjie Director and president Male 1955.03 2013.10.15-2016.10.14 350.8

Jiang Yunming Director and vice president Male 1965.10 2013.12.24-2016.10.14 278.5

Lin Zhangyi Director and vice president Male 1971.09 2013.12.24-2016.10.14 278.1

Tang Bin Director and board secretary Male 1957.02 2013.10.15-2016.10.14 263.4

Deng Ruilin Independent director Male 1949.06 2013.12.24-2016.10.14 7.5

Li Ruoshan Independent director Male 1949.02 2013.10.15-2016.10.14 30

Zhang Jie Independent director Male 1965.032013.12.24-

（see note 4）7

Zhou Qinye Independent director Male 1952.01 2013.10.15-2016.10.14 30

Paul M. Theil Independent director Male 1953.05 2013.12.24-2016.10.14 7.5

Kang YukunChairman of the board of

supervisorsMale 1954.05 2013.10.15-2016.10.14 330.0

Xu Chiyun Supervisor Female 1968.08 2013.10.15-2016.10.14 0

Yan Jie Supervisor Male 1980.06 2013.10.15-2016.10.14 0

Li Li Supervisor Female 1969.02 2013.10.15-2016.10.14 0

Li Jian Supervisor Male 1956.09 2013.10.15-2016.10.14 365.2

Lai Furong Supervisor Male 1968.10 2013.10.15-2016.10.14 330.3

Wang Guogang External supervisor Male 1955.11 2013.10.15-2016.10.14 24

Xu Bin External supervisor Male 1944.09 2013.10.15-2016.10.14 28

Zhou Yeliang External supervisor Male 1949.06 2013.10.15-2016.10.14 24

Chen Dekang Vice president Male 1954.09 2013.10.15-2016.10.14 305.6

Chen Jinguang Vice president Male 1961.11 2013.10.15-2016.10.14 269.5

Xue Hefeng Vice president Male 1969.03 2013.10.15-2016.10.14 270.1

DIReCtoRS, SuPeRVISoRS, SenIoRmanaGement memBeRS anD emPLoYeeS

83

Name Title GenderDate of

BirthTenure

Total remuneration from the Company during the reporting period (pretax) (in RMB ten thousand)

Li Weimin Vice president Male 1967.11 2013.10.15-2016.10.14 270.2

Lu Xiaodong Director Male 1964.09 2010.12.30-2013.10.15 0

Wu Shinong Independent director Male 1956.12 2010.12.06-2013.10.15 22.5

Lim Peng Khoon Independent director Male 1949.08 2010.10.28-2013.10.15 21

Wu Xiaohui Supervisor Female 1961.01 2010.10.28-2013.10.15 0

Xu Guoping Supervisor Male 1968.01 2010.10.28-2013.10.15 0

Li Zhaoming Supervisor Male 1968.07 2010.10.28-2013.10.15 0

Zhou Yuhan Supervisor Female 1968.10 2010.10.28-2013.10.15 0

Tu Baogui Supervisor Male 1953.01 2010.10.28-2013.10.15 115.5

Note: 1. The total remuneration for directors, supervisors and senior management members who held full-time

positions in the Company during the reporting period has included the annual risk fund, of which, the amount

for Gao Jianping (chairman) was RMB1.116 million, RMB1.082 million for Li Renjie (director and president),

RMB1.064 million for Kang Yukun (chairman of the board of supervisors), RMB0.98 million for Chen Dekang

(vice president), RMB0.881 million for Jiang Yunming (director and vice president), RMB0.881 million for Lin

Zhangyi (director and vice president), RMB0.865 million for Chen Jinguang (vice president), RMB0.865 million

for Xue Hefeng (vice president), RMB0.865 million for Li Weimin (vice president) and RMB0.8215 million for

Tang Bin (director and board secretary). In accordance with the Measures on Evaluation and Disbursement

related to Risk Fund for Senior Management Members, the risk fund should be disbursed in three years

following evaluation.

The total remuneration for Xu Bin included the remuneration for his serving as independent director of the

seventh board of directors during the reporting period.

During the reporting period, the actual remuneration paid for all directors, supervisors and senior management

members totaled RMB39.902 million.

2. As at the end of the reporting period, neither any director, supervisor or senior management member of the

Company held any share of the Company, nor there was any change in shareholding.

3. The decision-making procedures and criteria for determination of remuneration for directors, supervisors

and senior management members were as follows: the remuneration for directors, supervisors and

senior management members were ratified and paid in accordance with Regulations of Industrial Bank on

Independent Directors’ Allowance, Regulations of Industrial Bank on External Supervisors’ Allowance, Measures

of Industrial Bank for Performance Evaluation of Senior Management Members and Administrative Measures

of Industrial Bank for Remuneration of Senior Management Members. The specific criteria were as follows:

directors and supervisors who held full-time positions in the Company should receive remuneration for the

positions they held; shareholding directors and supervisors who did not hold full-time positions in the Company

should receive remuneration from the companies they served. The allowance for independent directors and

external supervisors was composed of basic allowance, committee allowance and work subsidy, which would

disbursed in accordance with the provisions stated in Regulations of Industrial Bank on Independent Directors’

Allowance and Regulations of Industrial Bank on External Supervisors’ Allowance respectively. As for senior

management members, the remuneration plan should be prepared by the compensation and assessment

committee under the board of directors and then submitted to the board of directors for approval.

84

4. The board of directors received Mr. Zhang Jie’s written resignation as independent director on February

25, 2014. According to requirements in the Opinions on Issues Concerning Further Regulating Part-time

Position (Post) Taken by Party and Government Leading Cadres in Enterprises (Zhong Zu Fa [2013] No. 18)

of the Organizing Department of the Central Committee of the CPC, Mr. Zhang Jie resigned from the post as

independent director, member of the nomination committee and member of the remuneration & evaluation

committee of the board of directors of the Company. In light of relevant stipulations in the Guiding Opinions on

Establishment of Independent Director Systems by Listed Companies of CSRC and the Articles of Association,

this resignation will take effect after a new independent director is elected at the general meeting to cover the

vacancy and qualifications of the new independent director are approved by relevant regulatory department.

(II) Positions held by directors and supervisors in shareholder companies

Name Shareholder company Title

Andrew H C Fung Hang Seng Bank LimitedExecutive director and head of Global Banking and Capital Markets

Li LiangwenThe People’s Insurance Company (Group) of China Limited

PICC Life Insurance Company Limited

Vice president and executive director

Deputy chairman and president

Zhang Yuxia State Tobacco Monopoly Bureau/China National Tobacco Corporation

Chief accountant

Xu Chiyun Longyan Municipal Bureau of Finance, Fujian Province Section chief

Li Li Shanghai Zheng Yang International Business Co., Ltd. Chairman

85

Name Working experience outline

A p p o i n t m e n t s o r c o n c u r r e n t appointments in organizations other than the Company or shareholder companies

Gao Jianping

Bachelor degree, senior economist. He served previously as deputy general manager of the general office of Industrial Bank, director of the Industrial Bank’s office in Fuzhou Economic and Technological Development Zone, general manager of the general office of Industrial Bank, head of Industrial Bank’s Shanghai branch preparatory team, president of Industrial Bank’s Shanghai branch, president assistant of Industrial Bank, vice president of Industrial Bank and president of Industrial Bank, secretary of communist party committee, chairman and president of Industrial Bank, and currently as secretary of communist party committee and chairman of Industrial Bank, and member of the National Committee of CPPCC.

Member o f t he 12 th Na t i ona l Committee of the Chinese People’s Political Consultative Conference

Liao Shizhong

Master degree, associate research fellow. He served previously as assistant research fellow, deputy director and associate research fellow of Scientific Research Division of Economics Institute of Fujian Provincial Academy of Social Sciences, deputy director and director of Fujian Provincial Institute for Fiscal Science Research, vice president and secretary-general of Fujian Provincial Society of Finance; and currently as vice president of Fujian Provincial Society of Finance.

Vice president of Fujian Provincial Society of Finance

Andrew H C Fung

University graduate. He served previously as managing director of global financial market of DBS Bank Ltd., deputy general manager and head of investment and insurance of Hang Seng Bank, general manager and head of investment and insurance of Hang Seng Bank, and currently as executive director and head of global banking and capital markets of Hang Seng Bank.

Director and general manager of Hang Seng Investment Management Ltd., director of Hang Seng Asset Management Pte Ltd., Hang Seng Bullion, Hang Seng Insurance, Hang Seng Investment, Hang Seng Life and Hang Seng Securities

Li Liangwen

Bachelor degree, senior economist. He served previously as deputy general manager, general manager of PICC Qinhuangdao Company, deputy general manager of China Insurance (UK) Company, deputy general manager of PICC Hebei Company, deputy general manager of China Life Insurance Hebei Company, general manager of Department of Actuarial of China Life Insurance, and vice president of China Life Insurance Co., Ltd.; and currently as vice president, executive director of The People’s Insurance Company (Group) of China Limited, and deputy chairman and president of PICC Life Insurance Company Limited.

None

(III) An outline of working experience of directors, supervisors and senior management members, and their appointments or concurrent appointments in organizations other than the Company or shareholder companies

86

Name Working experience outline

A p p o i n t m e n t s o r c o n c u r r e n t appointments in organizations other than the Company or shareholder companies

Zhang Yuxia

Bachelor degree, senior accountant. She served previously as section chief, deputy director and director of industry section II, Department of Industry, Transportation and Finance of Ministry of Finance, deputy director of Institution Service Center of Ministry of Finance, and chief of Department of Financial Management and Supervision (Department of Audit) of State Tobacco Monopoly Bureau; and currently as chief accountant of State Tobacco Monopoly Bureau/China National Tobacco Corporation.

Director of Bank of Communications

Chua Phuay Hee

Master degree. He served previously as director of insurance and statistics department, manager of human resources and administration department, director of securities business department of Monetary Authority of Singapore, general manager of investment and plan department, chief financial officer, chief risk officer of Keppel TatLee Bank of Singapore, and executive director of Singapore-based Wilmar International Limited; and currently as director of Singapore-based Temasek Life Sciences Laboratory Ltd.

D i r e c t o r o f S i n g a p o r e - b a s e d Temasek Life Sciences Laboratory Ltd

Li Renjie

Bachelor degree, senior economist. He served previously as director of planning division of Fujian branch of The People’s Bank of China (PBOC), executive director of Hong Kong Jiang Nan Finance Ltd., chairman of Great Wall Securities Co., Ltd., head of preparatory team, president of Industrial Bank’s Shenzhen branch, vice president of Industrial Bank; and currently as communist party committee member and president of Industrial Bank.

None

Jiang Yunming

PhD degree, senior economist. He served previously as deputy section chief of business section of securities business department, manager of issuance department of Industrial Bank, general manager assistant and manager of investment banking of Industrial Securities, deputy general manager of general office, general manager of board secretariat and deputy general manager of general office, general manager of general office of Industrial Bank, president of Industrial Bank Beijing branch; currently as party committee member and vice president of Industrial Bank.

None

Lin Zhangyi

University graduate, master degree, senior economist. He served previously as deputy section chief of general section of general office, deputy head of Fuqing sub-branch, Fuzhou branch of Industrial Bank, president assistant and manager of personnel & education department of Fuzhou branch, vice president of Fuzhou branch, vice president of Industrial Bank Shanghai branch, general manager of Industrial Bank general office; and currently as party committee member, vice president of Industrial Bank, and chairman of Industrial Bank Financial Leasing Co., Ltd.

Chairman of Industrial Bank Financial Leasing Co., Ltd.

87

Name Working experience outline

A p p o i n t m e n t s o r c o n c u r r e n t appointments in organizations other than the Company or shareholder companies

Tang Bin

University graduate, master degree, senior economist. He served previously as deputy director of trade statistics department, deputy director of foreign trade statistics department of Fujian Provincial Statistics Bureau, deputy director of integrated planning department, director of distribution system department, system reform commission of Fujian Province, general manager of Industrial Bank general office, business department and corporate finance department of Industrial Bank, head of preparatory team of Industrial Bank Hangzhou branch, general manager of secretariat of Industrial Bank board of directors, board secretary and general manager of board office of Industrial Bank; and currently as board secretary of Industrial Bank.

None

Deng Ruilin

Master degree, senior economist. He served previously as deputy director, director of HR Department, PBOC Guizhou Branch, secretary of Party Group, president of PBOC Zunyi Branch, member of Party Group, member of Party Committee, vice president of PBOC Guizhou Branch and deputy director general of SAFE Guizhou Branch, member of Party Committee of PBOC Chengdu Branch, secretary of Party Group and special delegate of Guiyang Financial Regulation Office, preparatory group leader of CBRC Guizhou Supervision Bureau, director general and secretary of Party Committee of CBRC Guizhou Supervision Bureau, inspector of CBRC Guizhou Supervision Bureau, and member (member of the standing committee) of the 10th CPPC and deputy director of Economic Committee.

None

Li Ruoshan

PhD degree, professor, Chinese cert i f ied public accountant. He served previously as deputy dean of accounting department and vice president of school of economics, Xiamen University; dean of accounting department and finance department, and vice president of school of management of Fudan University; currently as MPACC academic dean, professor, PhD tutor, school of management, Fudan University.

MPACC academic dean, professor a n d P h D t u t o r o f s c h o o l o f management, Fudan University, independent d i rector o f China Eastern Airlines and Xi’an Shangu Power Co., Ltd.

Zhang Jie

PhD degree, professor. He served previously as executive deputy director, associate professor, director and professor of department of finance of Shaanxi Institute of Finance and Economics, dean, professor and PhD tutor of School of Economics and Finance of Shaanxi Institute of Finance and Economics, deputy dean, professor, PhD tutor of School of Economics and Finance, director of Academic Committee and director of Financial Institution and Development Research Center of Xi'an Jiaotong University; and currently as deputy dean, professor, PhD tutor of School of Economics and Finance and director of Institute of International Monetary Research of Renmin University of China.

Deputy dean , p ro fessor, PhD tutor of School of Economics and Finance and director of Institute of International Monetary Research of Renmin University of China.

88

Name Working experience outline

A p p o i n t m e n t s o r c o n c u r r e n t appointments in organizations other than the Company or shareholder companies

Zhou Qinye

Master degree, professor. He served previously as deputy dean of school of accountancy, Shanghai University of Finance and Economics, and deputy director of development research center, director of listing division, deputy general manager and then chief accountant of the Shanghai Stock Exchange.

PhD tutor of Fudan Universi ty, a d j u n c t p r o f e s s o r o f X i a m e n University and Shanghai University o f F i n a n c e a n d E c o n o m i c s ; independent director of Shanghai Pudong Development Bank, Saic Motor, Shanghai Jahwa United and China Coal; and director of Shanghai East-China Computer and Anxin Trust

Paul M. Theil

PhD degree. He served previously as first secretary, commercial counselor of the US Embassy in China and the executive director of Morgan Stanley; and currently as chairman of Shenzhen Zhong An Credit Venture Capital Co, Ltd.

Chairman of Shenzhen Zhong An Credit Venture Capital Co, Ltd., director of Guo An County Bank, independent director of Morgan Stanley Huaxin Fund Management C o m p a n y L i m i t e d , l e g a l representative of Mohs Industrial Development (Shenzhen) Co. , Ltd. and president of Small Loans Industry Association of Shenzhen

Kang Yukun

Bachelor degree, senior economist. He served previously as deputy manager of Industrial Bank’s credit department, vice president (in charge of overall management) of Industrial Bank’s Putian branch, vice president (in charge of overall management) and then president of Industrial Bank’s Fuzhou branch and communist party committee member, director and vice president of Industrial Bank, and currently as communist party committee member and chairman of the board of supervisors of Industrial Bank.

None

Xu Chiyun

University graduate, senior accountant. She previously served as deputy section chief, principal section member of Longyan Municipal Bureau of Finance and deputy president of Accountants Society of Longyan, Fujian Province; and currently as section chief of Longyan Municipal Bureau of Finance, Fujian Province, and deputy secretary general of Finance, Accountants & Abacus Society of Longyan.

D e p u t y s e c r e t a r y g e n e r a l o f Finance, Accountants & Abacus Society of Longyan and director of Longyan Huijin Assets Management Development Co., Ltd.

Yan Jie

Master degree. He served previously as manager of Inner Mongolia Yongfeng Investment Management Co., Ltd. and investment specialist of Zheng Yuan Investment Co., Ltd.; and currently as investment market director of Zheng Yuan Investment Co., Ltd.

Investment market director of Zheng Yuan Investment Co., Ltd.

Li Li

Master degree. She served previously as senior manager of head office off-shore banking department and inter-bank department of CMBC, vice president of America headquarters and Hong Kong branch of America-based PIMCO; and currently as chairman of Shanghai Zheng Yang International Business Co., Ltd.

Managing director of Shanghai Guohe Modern Service Industry Equity Investment Management Co., Ltd., independent director of Sangon Biotech (Shanghai) Co., Ltd. and supervisor of ALL IN PAY Network Services Co., Ltd.

89

Name Working experience outline

A p p o i n t m e n t s o r c o n c u r r e n t appointments in organizations other than the Company or shareholder companies

Li Jian

Master degree, senior accountant. He served previously as planning team leader, director assistant, deputy director of budget office, concurrently director of budget office, fiscal revenue inspection office and infrastructure construction office, director of enterprise office of Fujian Provincial Department of Finance; and currently as general manager of planning & finance department of Industrial Bank.

None

Lai Furong

Bachelor degree, senior accountant. He served previously as vice head and head of Jin’an sub-branch, Fuzhou branch of Industrial Bank, deputy general manager of finance and accounting department of Industrial Bank, vice president of Guangzhou branch of Industrial Bank, vice general manager of planning and financial department of Industrial Bank; and currently as general manager of audit department of Industrial Bank.

None

Wang Guogang

PhD degree, research fellow. He served previously as a teacher of Fujian Normal University, professor of international business school of Nanjing University, general manager of Jiangsu Xingda Securities Investment Service Co., Ltd., chairman of Jiangsu Xingda Certified Public Accountants Limited, vice president of China Huaxia Securities Co., Ltd., research fellow of Chinese Academy of Social Sciences; and currently as director of Financial Research Institute, Chinese Academy of Social Sciences.

Director of Financial Research Institute, Chinese Academy of Social Sciences

Xu Bin

PhD degree, senior economist. He served previously as director of PBOC Dandong municipal administration office of Liaoning Province, vice president of PBOC Dandong municipal branch, vice president of PBOC Liaoning Provincial branch, vice director of State Administration of Foreign Exchange, president and chairman of China Everbright Bank, vice chairman of China Everbright (Group) Corporation, vice chairman of Hong Kong China Everbright Group Corporation Limited, vice chairman of Hong Kong-listed China Everbright Holding Company Limited; and currently as director of Sun Life Everbright Life Insurance.

Director of Sun Life Everbright Life Insurance and independent director of China Industrial International Trust Limited

Zhou Yeliang

Bachelor degree. He served previously as deputy head of Nanping region sub-branch, vice president of Jianyang region branch, president of Nanping City branch, vice president of Fujian Provincial branch, head of Fuzhou central sub-branch, head of Hangzhou central sub-branch of PBOC; and currently as counselor of the People's Government of Zhejiang Province, president of Zhejiang Equity Investment Industry Association, distinguished senior fellow of Zhejiang University-Institute of Finance.

C o u n s e l o r o f t h e P e o p l e ' s Government of Zhejiang Province, p r e s i d e n t o f Z h e j i a n g E q u i t y Investment Industry Association, Zhejiang University-Inst i tute of Finance distinguished senior fellow, and independent director of Industrial Trust

90

Name Working experience outline

A p p o i n t m e n t s o r c o n c u r r e n t appointments in organizations other than the Company or shareholder companies

Chen Dekang

Bachelor degree, senior economist. He served previously as vice president of Ningde branch, deputy general manager, general manager of business operation department, vice president ( in charge of overall management), president of Xiamen branch of Industrial Bank, and currently as communist party committee member and vice president of Industrial Bank.

None

Chen Jinguang

College graduate, economist. He served previously as head of Pudong sub-branch of Shanghai branch, vice president of Shanghai branch, president of Ningbo branch, president of Chengdu branch and president of Beijing branch of Industrial Bank; and currently as party committee member and vice president of Industrial Bank.

None

Xue Hefeng

Bachelor degree. He served previously as deputy manager of operation department of Fuzhou branch, deputy head of Majiang office of Fuzhou branch, general manager of credit management department of Beijing branch and head of Chaowai sub-branch, general manager of risk management department of Beijing branch, president assistant and general manager of risk management department of Beijing branch, vice president of Beijing branch, and president of Shenzhen branch of Industrial Bank; and currently as party committee member and vice president of Industrial Bank.

None

Li Weimin

University graduate, master degree, senior economist. He served previously as deputy manager and then manager of operation department of Fuzhou branch, president assistant and manager of general office of Fuzhou branch, vice president of Fuzhou branch, vice president of Nanjing branch, president of Zhangzhou branch, president of Zhengzhou branch, and president of Fuzhou branch of Industrial Bank; and currently as party committee member and vice president of Industrial Bank.

None

91

(IV) Changes of directors, supervisors and senior management members during the reporting period

1. In the general meeting of the Company on October 15, 2013, Mr. Gao Jianping, Mr. Li Renjie, Mr. Jiang

Yunming, Mr. Lin Zhangyi and Mr. Tang Bin were elected as executive directors of the eighth board of

directors. Mr. Liao Shizhong, Mr. Andrew H C Fung, Mr. Li Liangwen, Ms. Zhang Yuxia and Mr. Chua Phuay

Hee were elected as non-executive directors of the eighth board of directors. Mr. Deng Ruilin, Mr. Li Ruoshan,

Mr. Zhang Jie, Mr. Zhou Qinye and Mr. Paul M.Theil were elected as independent non-executive directors of

the eighth board of directors. Among them, the seven new directors Mr. Li Liangwen, Ms. Zhang Yuxia, Mr.

Jiang Yunming, Mr. Lin Zhangyi, Mr. Deng Ruilin, Mr. Zhang Jie and Mr. Paul M.Theil took office after their

qualifications for directorship were approved by CBRC Fujian Bureau on December 24, 2013. The term of

office of the directors Mr. Lu Xiaodong, Ms. Xu Chiyun, Mr. Chen Dekang, Mr. Xu Bin, Mr. Wu Shinong and Mr.

Lim Peng Khoon of the seventh board of directors expired.

2. Through election by the Company’s employees’ conference on October 14, 2013, Mr. Kang Yukun,

Mr. Li Jian and Mr. Lai Furong were elected as employee representative supervisors of the sixth board of

supervisors. The term of office of the employee representative supervisor Mr. Tu Baogui of the fifth board of

supervisors expired.

3. In the general meeting of the Company on October 15, 2013, Ms. Xu Chiyun, Mr. Yan Jie and Ms. Li Li were

elected as shareholder supervisors of the sixth board of supervisors, and Mr. Wang Guogang, Mr. Xu Bin and

Mr. Zhou Yeliang were elected as external supervisors of the sixth board of supervisors. The term of office of

shareholder supervisors Ms. Wu Xiaohui, Mr. Xu Guoping, Mr. Li Zhaoming and Ms. Zhou Yuhan of the fifth

board of supervisors expired.

92

II. EmployeesAs at the end of the reporting period, particulars of employees of the Company were as follows:

Number of the incumbent staff of the parent company 47,290（incl. 14,156 dispatched employees）

Number of the incumbent staff of main subsidiaries 551（incl. 57 dispatched employees）

Total number of the incumbent staff 47,841

Number of retirees whose expenses are undertook by the parent company and its main subsidiaries

276

Education level

Type of education Number

Master and above 6,040

Bachelor 34,244

College 6,704

Secondary technical school and below 853

total 47,841

Professional occupation

Type of professional occupation Number

Management 2,858

Business 39,177

Support 5,806

total 47,841

education level Professional occupation

College

Secondary technical school and below

Master and above

Support

Management

Bachelor Business

93

In remuneration management, the Company stuck to the principles of meeting the requirements of corporate

governance, promoting the competitiveness and sustainable development of the Bank, adapting to the

operating results and coordinating short and long-term incentives. While internal fairness and external

competitiveness were emphasized, the remuneration management should contribute to the implementation

of the Company’s strategic objectives, support the demands of business development at different stages, and

realize the attraction and retaining of key employees.

During the reporting period, following the ideas of “planning before implementation by stage and developing

gradually while quickening up steps in certain areas”, the Company formulated the Plans for the Creation

of a New Training System (2012-2015). Through fully execution of the annual training plan, the Company

established a sound training system covering employees at all levels with focus on different fields,

which enabled employees to learn in more ways, access to more training resources, and improve their

professionalism and comprehensive capabilities, hence better serving the strategy of the Company.

94

CoRPoRate GoVeRnanCe

1. Corporate governance overviewOver the last few years, the Company continued to strengthen corporate governance, while constructing and

clarifying the objectives and direction of the board of directors and the board of supervisors. The Company

continued to solidify the governing concept of sustainable development to shape scientific and democratic

decision-making, established a research and training learning system for directors and supervisors, and

created a sound corporate governance transmission mechanism.

During the reporting period, the board of directors and the board of supervisors fully performed their functions

of making strategic decisions and supervision. It successfully accomplished the transition of the board of

directors and the board of supervisors, worked out the operation plan for 2013, enhanced overall capital

management, furthered group-oriented operation, boosted the reform to become more professional and

earnestly fulfilled social responsibilities. Meanwhile, it also organized investigation for specific topics for

directors and supervisors to enable them to gain a comprehensive understanding of the operation of the

Company and improve their capacities of legally and professionally performing their duties and responsibilities.

In addition, the Company further revised the Company’s Articles of Association, the Rules of Procedures

for General Meetings, the Rules of Procedures for Board of Directors, the Rules of Procedures for Board of

Supervisors and working rules and systems of each committee of the board of directors and the board of

supervisors. It also worked out the Data Governance Policy of Industrial Bank and the Internal Accountability

Measures for Illegal Behaviors in Securities Transaction, amended the Measures for the Management of

Business Continuity and the Administrative Measures of Persons with Inside Information and other basic

systems, enhanced the management of archives concerning performance by directors and supervisors of

their duties, and made corporate governance operated in a more standard way. Furthermore, the Company

effectively implemented the feedback and transmission mechanism for major decisions of the board of

directors and the board of supervisors, actually conveyed the spirits of meetings of the board of directors and

the board of supervisors, and promoted a sound and sustainable development of the Company to safeguard

the interests of all shareholders and stakeholders.

(I) Shareholders and general meetings

During the reporting period, the Company normalized the convening, holding, deliberation and voting

procedures of general meetings in accordance with relevant laws and regulations, the articles of association of

the Company and the provisions on the rules of procedures for general meetings, and safeguarded the lawful

rights of shareholders. Meanwhile, the Company improved the channels it communicated with its shareholders,

actively solicited opinions and suggestions from shareholders, and ensured that the rights of shareholders to

be informed, participate in and vote on major issues of the Company were exercised according to laws.

The Finance Bureau of Fujian Province, which holds17.86% shares in the Company, is the largest shareholder

of the Company. The Company is totally independent from its largest shareholder in all aspects, including

asset, personnel, finance, institution and business. The major decisions of the Company are made and

executed by the Company at its absolute discretion. The Company’s major shareholders have neither

appropriated any capital of the Company nor requested the Company to act as a guarantor for a third party in

any way whatsoever.

(II) Directors and the board of directors

The board of directors of the Company consists of fifteen directors. By type, there are ten non-executive

95

directors (including five independent non-executive directors) and five executive directors. By geography,

there are twelve domestic directors and three overseas directors. There are five committees under the board

of directors, namely, the strategy committee, the risk management committee, the audit and related party

transaction control committee, the nomination committee and the remuneration and evaluation committee.

Except for the strategy committee, the other four committees are all chaired by independent directors. By

giving full play of their professional strengths, those committees review and discuss a number of important

issues, and submit their opinions to the board of directors for consideration and approval, whereby the

Company’s corporate governance and operating efficiency have been improved effectively. During the

reporting period, eight meetings of the board of directors were convened and the aforesaid committees held

20 meetings in total, at which 141 proposals were considered or heard. Through these meetings, the board of

directors effectively played its role of decision-making in development of corporate strategies, determination of

the business plan and enhancement of capital management and group-oriented operation, and the functions

of its committees to give supports to such decision-making were also strengthened.

(III) Supervisors and the board of supervisors

The board of supervisors has nine supervisors, including three shareholder representatives, three employee

representatives and three external supervisors. Two specialized committees have been set up under the

board of supervisors, namely the supervision committee and the nomination, remuneration and evaluation

committee. Both of the committees are headed by external supervisors. By attaching priority to the interests of

shareholders and the Company as a whole, the board of supervisors fulfilled its supervision duties by carrying

out specific investigations and audits, monitoring financial activities, risk management and internal control

of the Company and supervising performance by the board of directors and senior management of their

duties. During the reporting period, the Company held seven meetings of the board of supervisors (including

two teleconferences), approving or hearing 28 proposals. The committees under the board of supervisors

convened four meetings, at which, seven proposals were considered and approved.

(IV) Senior management

As at the end of the reporting period, the Company had seven senior management members, including one

president and six vice presidents. Authorized by laws and regulations, the articles of association and the board

of directors, the president took responsibilities for guiding overall operation and management of the Company,

implementing resolutions approved by the general meeting and the board of directors, and formulating annual

business plans, investment plans, annual financial budgets and final accounts, profit distribution plans, basic

management rules and regulations.

Under the senior management, there were several committees, namely, the franchise management committee,

the asset and liability management committee, the risk management committee, the credit approval committee,

the internal control committee, the credit accountability committee, the major purchases committee, the

business continuity management committee, the internal accountability committee and the community bank

committee.

(V) Related party transactions

During the reporting period, the Company enhanced management of related party transactions. In light of the

regulatory provisions of the Ministry of Finance, CBRC, CSRC and Shanghai Stock Exchange, the Articles

of Association, the Administrative Measures of Industrial Bank Co., Ltd. for Related Party Transactions

and the Implementation Rules of Industrial Bank Co., Ltd. for Management of Related Party Transactions,

96

organs at all levels including the general meeting, the board of directors, the senior management and related

departments of head office and branches strictly conducted review, examination, approval and management

of related party transactions as well as the monitoring and management of approved quotas according to their

functions respectively, disclosed the information of related party transactions in a timely manner and the board

of supervisors made supervision over such practices. The principles of “fairness, openness and valuable

consideration” were followed in all related party transactions between the Company and related parties, with

fair and reasonable transaction terms and fair price not superior to similar transactions with un-related parties,

and therefore, the benefits of the Company and shareholders were effectively safeguarded and relevant

businesses enjoyed a standard and sustainable development.

(VI) Implementation of the management system to the persons with inside information

In addition to the existing information disclosure management system, the Company released the

Administrative Measures of Persons with Inside Information pursuant to the requirements of CSRC and its

Fujian Bureau, with a view to enhance the confidentiality management of inside information. By improving the

procedures for internal circulation and external submission of material information, the Company strengthened

management of filings and archives concerning insiders, urged and asked major shareholders to follow

the regulatory provisions on inside information so as to prevent or eliminate illegal acts including insider

trading and ensure equality in information disclosure. Meanwhile, the Company specially set up a column

for prevention of insider trading on its website, where it posted the telephone number to encourage external

supervision over insider trading. During the reporting period, the Company fully carried out the information

disclosure system, registering and submitting information about insiders to the competent securities regulator

in a timely manner, and there was no instance occurred that the insiders traded the stocks by taking advantage

of insider information prior to the disclosure of substantial information.

During the reporting period, the Company’s board of directors won the prize of “Best Board of Directors” in

the Ninth “Gold Prize of Round Table” of Chinese Boards of Listed Company again after last time in 2010; and

it ranked the “2013 Top 10 Boards of Directors of Chinese Mainboard Listed Companies” in the Sixth Best

Board of Directors Appraisal among Chinese Listed Companies sponsored by Money Week. The Company

also ranked No. 2 in the 2013 Top 100 Capital Brand Value released by China Center for Market Value

Management (CCMVM). In the Eighth Asian 21st Century Annual Finance Summit, the Company ranked No.7

in terms of bank competitiveness and topped China’s joint-stock banks. In addition, it also won the prize of

“Asian Bank Offering the Greatest Returns to Shareholders 2013”.

97

II. Brief introduction to general meetings

Term Date Name of proposals Resolution

Index of the website

designated for publication of

resolution

Date of disclosure for

publishing resolution

Annual generalmeeting 2012

May 21,2013

The Annua l Work Repor t o f the Board of Directors 2012; the Annual Work Report of the Board of Supervisors 2012; the Annual Appraisal Report on Duty Performance of Directors 2012; the Annual Appraisal Report on Duty Performance of Supervisors 2012; the Annual Appraisal Report by the Board of Supervisors on the Duty Performance of Directors and Senior Management Members 2012; the Report on Final Financial A c c o u n t s 2 0 1 2 & F i n a n c i a l Budget Plan 2013; the Annual Profi t Distr ibution Plan 2012; the Proposal on Employment of Accounting Firms for 2013; and the Annual Report and Abstract 2012.

Adopted

Websites of the Shanghai Stock Exchange(www.sse.com.cn) and the Company (www.cib.com.cn)

May 22, 2013

First extraordinary general meeting 2013

October15, 2013

The Proposal on Elect ion of Directors for the Eighth Board of Directors; the Proposal on Election o f Shareho lde r Superv i so rs and External Supervisors for the Sixth Board of Supervisors; the Proposal on Amendment of Articles of Association; the Proposal on Amendment of the Rules of Procedures for Board of Supervisors; and the Proposal on Offering of Write-down Qualified Tier Two Capital Bonds.

AdoptedOctober 16,

2013

98

III. Performance by directors of their dutiesDuring the reporting period, the Company held eight meetings of the board of directors, including five onsite

meetings and three teleconferences. Specifically, attendances to the meetings of the board of directors and to

the general meetings by directors were as follows:

Name

As an

inde-

pendent

director

Attendance to meetings of the board of directors

Attendance

to meetings

of the

shareholders

Expected

attendance

Attendance

in person

Attendance

through

teleconference

Attendance

by proxyAbsence

Failure to

attend in

person for

consecutive

twice

Attendance

Gao Jianping No 8 8 0 0 0 No 2

Liao Shizhong No 8 8 0 0 0 No 2

Andrew H C Fung No 8 5 0 3 0 No 1

Li Liangwen No 3 3 0 0 0 No 1

Zhang Yuxia No 3 2 0 1 0 No 1

Chua Phuay Hee No 8 7 0 1 0 No 1

Li Renjie No 8 8 0 0 0 No 2

Jiang Yunming No 3 3 0 0 0 No 1

Lin Zhangyi No 3 3 0 0 0 No 2

Tang Bin No 8 8 0 0 0 No 2

Deng Ruilin Yes 3 3 0 0 0 No 1

Li Ruoshan Yes 8 8 0 0 0 No 1

Zhang Jie Yes 3 3 0 0 0 No 1

Zhou Qinye Yes 8 7 0 1 0 No 1

Paul M. Theil Yes 3 3 0 0 0 No 1

Lu Xiaodong No 5 5 0 0 0 No 1

Xu Chiyun No 5 5 0 0 0 No 2

Chen Dekang No 5 5 0 0 0 No 1

Xu Bin Yes 5 5 0 0 0 No 1

Wu Shinong Yes 5 4 0 1 0 No 1

Lim Peng Khoon Yes 5 5 0 0 0 No 0

During the reporting period, independent directors gave no objections to the issues of the Company.

99

IV. Important opinions and suggestions by the committees under the board of directors in performing their duties during the reporting period(I) The strategy committee earnestly performed its duties and responsibilities prescribed in the articles of

association and exercised its rights authorized by the board of directors. It considered and made decisions on

relevant important issues, supervised and urged the senior management to carry out resolutions of the board

of directors. To organize the transition of the board of directors, it proposed such fundamental principles as

according to the law and routine, keeping continuous work and being efficient and pragmatic, ensuring the

successful transition of the board of directors. To strengthen comprehensive capital management, it stressed

on the operating orientation of returns on risk assets and boosted the deepened adjustment of business

structure. Through overall planning and comprehensive operation, it was approved to establish CIB Fund

Management Co., Ltd., and also increased capital to Industrial Trust, which was finished at the beginning

of 2014, with the synergistic effect of group-oriented development gradually appearing. It reinforced the

management on acquisition planning and use of fixed assets, worked out scientific acquisition budget and

presented some potential risks in acquisition or construction of specific projects. To intensify the management

of branches, it made overall planning on the positioning and management mode of physical outlets and

intangible channels, gave scientific layout of outlets, accelerated the construction of community bank, and

promoted to form a diversified channel operation structure with reasonable division of work, complementary

advantages and consistent experience. By strengthening the allocation of cadres and management of

authorization, it adapted to the demand for sustainable development and improved the operating quality and

efficiency. It also suggested the Company should reasonably arrange the write-off of bad debts and transfer

of assets, perfect relevant systems and control measures, standardize the disposal procedure and accurately

calculate gains and losses, thus reinforcing the ability to resist risks. Besides, it supervised and checked the

implementation of the resolutions of the board of directors and guided the senior management to effectively

carry out management work, resulting in the coordinated growth between business scale and operation

performance, and retaining relatively stable asset quality.

(II) By following changes of the macro-economic situation and regulatory policies and hot issues in the market,

the risk management committee made a comprehensive and deep analysis on primary risks confronted by

the Bank in operation and management, and provided its opinions and suggestions on risk management, thus

effectively improving the Company’s professionalization, control effectiveness and market sensitiveness in

risk management, and ensuring its steady and compliant operation. In respect of credit risk management, it

advised the Company to pay high attention to asset quality management and strengthen the perspectiveness

in risk management. With respect to liquidity risk management, it requested the Company to improve relevant

business operation and risk control systems and reinforce the management on maturity mismatch and

concentration rate to guarantee liquidity safety. As to business continuity management, it recommended the

Company to make business continuity management regular via system arrangement and resource support,

and establish high efficient emergency mechanism. With respect to compliance risk management, it suggested

the Company to pay attention to the legitimacy of business operation and ensure the compliance of relevant

trading authorization and information disclosure. With respect to the implementation of the new capital accord,

it requested the Company to attach importance to data governance, continuously reinforce the verification and

analysis of computational results of the data model and constantly improve applicability and reliability of the

model. With respect to risk management in key business area, for example, as to loans to government-backed

investment units, it requested the Company to learn about the overall risk condition by means of dual-line

management after loan and risk examination; as to credits granted to steel trading companies, it requested

the Company to strictly check the authenticity and compliance of the purpose of the loans; and as to emerging

businesses, it recommended the Company to further review the internal process and reinforce the operating

standardization. The risk management committee also proposed many good suggestions to business

100

development direction of the Bank in the future.

(III) The audit and related party transaction control committee performed its duties with due diligence in

strengthening the independence of external audit, reinforcing the authenticity of the Company’s financial

statements, ensuring the reliability of internal audit and internal control as well as the effectiveness of

related party transaction management, gave full play to its supervision and review function, and actively

assisted the board of directors in making decisions. During the reporting period, the committee held a total

of 5 meetings with the external audit accounting firm in different stages of audit, requiring external auditors

to supervise the management to standardize relevant business operation in strict accordance with relevant

latest regulatory requirements of CBRC, and focus on capital flow of steel trading companies, risks in loans to

government-backed investment units, potential risks in emerging businesses, IT risks, and the independence,

specialization and effectiveness of risk management after reform of business lines. Besides, it required

external auditors to make full use of quantitative analysis means to specify audit evidences and improve

quality of the management proposal so that the board of directors and management could know about the

Bank’s businesses through external auditors and improve its operation and management. During the review

process of quarterly reports, semi-annual report and annual report, the committee earnestly performed its

duties, ensured the authenticity and accuracy of financial statements and effective information disclosure, and

provided many beneficial opinions and suggestions for the adjustment of business structure, the development

of emerging businesses, the group-oriented operation and business compliance. With respect to related party

transaction management, the committee required related party transaction management departments to strictly

follow the principles of fairness, reasonableness and transparency, improve the uniform credit management

and the identification and evaluation management of pricing not superior to that of an independent third party,

and prudently manage related party transactions. In addition, the committee also required the internal audit

department and the internal control department to further improve the accountability system, supervise the

implementation and rectification. It also required the financial department to pay close attention to impacts of

the changes of the macro-economic situation and regulatory policies on operating activities of the Company,

and reasonably set annual financial budget indicators.

(IV) The nomination committee earnestly made preparations for the transition of the board of directors,

considered and studied the Methods for Nomination and Election of Directors so as to guarantee the normal

and orderly work of transition. It selected candidates for directors extensively in the aforesaid methods,

carefully checked the qualifications of directors, the matching on age, specialty and job among directors, and

built a professional board of directors adapting to development of the Company.

(V) Centering on the Company’s development plan and annual business objectives, following the performance

appraisal criteria and assessment procedure, the remuneration & evaluation committee made annual appraisal

on duty performance of senior management members, proposed performance appraisal opinions to the senior

management team and individual members, and formulated the 2012 Performance Salary Distribution Plan for

Senior Management Members. The committee also put forward some constructive opinions for improving the

remuneration and evaluation system of senior management members.

V. Description of risks discovered by the board of supervisorsDuring the reporting period, the board of supervisors made no objection to the issues under supervision during

the reporting period.

101

VI. Description of independence of the Company from its largest shareholderThe Finance Bureau of Fujian Province, which holds 17.86% shares in the Company, is the largest

shareholder of the Company. The Company is totally independent from its largest shareholder in all aspects,

including asset, personnel, finance, institution and business. The major decisions of the Company are made

and executed by the Company at its absolute discretion. The Company’s major shareholders have neither

appropriated any capital of the Company nor requested the Company to act as a guarantor for a third party in

any way whatsoever.

VI I . Examinat ion and evaluat ion mechanism as wel l as establishment and implementation of the incentive system for senior management members during the reporting periodSenior management members were subject to the examination and assessment by the board of directors. The

board of directors has formulated the Measures for Performance Evaluation of Senior Management Members

and the Administrative Measures for Remuneration of Senior Management Members. By adopting optimal

remuneration structures for senior management members and reasonable evaluation indicators and creating

an evaluation mechanism that linked the remuneration with duties, risks and operating results, it motivated

and constrained senior management members to work hard for the Company’s benefits.

102

InteRnaL ContRoL

I. Statement of responsibility for internal control and building of internal control system

1. Statement of the board of directors of responsibility for internal control

The Company’s internal control was for the purpose of ensuring the implementation of state laws, regulations

and internal rules, ensuring the full implementation and realization of the Company’s development strategies

and business objectives, ensuring the effectiveness of the risk management system, guaranteeing the

timeliness, authenticity and integrity of the Company’s business records, financial information and other

management information, and ensuring security of the Company’s assets. On account of the inherent limitation

of internal control, the board of directors could only provide reasonable guarantee for the aforesaid objectives.

It was the responsibility of the board of directors to build, perfect and effectively carry out internal control,

evaluate its effectiveness and truthfully disclose the internal control evaluation report. The board of

supervisors supervised the board of directors’ establishment and implementation of internal control. The senior

management organized and led the daily operation of the Company’s internal control.

2. Basis for building internal control over financial statements

During the reporting period, the Company built and perfected its internal control system over financial

statements by following the Basic Internal Control Norms for Enterprises issued by the five ministries and

commissions including the Ministry of Finance and supporting guidelines, according to relevant provisions

in the Guidelines for Internal Control of Commercial Banks of CBRC and the Guidelines of Shanghai Stock

Exchange for the Internal Control of Listed Companies, based on requirements in the Basic Internal Control

System of Industrial Bank Co., Ltd., and centering on the Company’s internal control objectives.

3. Building of internal control system

Sticking to the principles of “comprehensiveness, prudence, effectiveness and independence”, the Company

continued to improve the building of internal control mechanism in terms of internal control environment, risk

identification and evaluation, internal control activities, information exchange and feedback, supervision,

evaluation and correction, and etc., with internal control running through the whole process of decision-making,

execution, supervision and feedback, and covering all kinds of businesses and matters of the Company and

its subsidiaries.

In respect of building internal control system, starting from implementing compliant operation and

strengthening execution of management and control, according to the laws and regulations, internal and

external management requirements, the Company promoted the system management and effectively

prevented risks from the sources. During the reporting period, based on the demands for business lines reform

and business innovation, the Company continuously propelled the system construction and restructuring,

and constantly improved the working mechanism of system management. It completed the daily review of

legal compliance of systems, continued to examine and sort systems, carried out evaluation after system

and facilitated the transmission and linkage of system management between the Head Office and branches.

The Company also reinforced the supervision and evaluation over system execution to guarantee standard

business process and orderly operation management.

In respect of self-assessment of internal control, the Company paid close attention to the self-assessment

of works concerning internal control. On the basis of daily supervision and special supervision over internal

103

control, it also organized functional departments and branches to make self-assessment on the effectiveness

of design and operation of the internal control. During the reporting period, the management formed an

internal control evaluation system construction work group with leaders of the Head Office and directors of

primary departments as the leading group members, to make decision, guide and coordinate major issues

relevant to the implementation of self-assessment. The self-assessment of internal control by the management

run through the three levels of the Head Office, branches and sub-branches. Firstly, based on the principle

of materiality, it clarified the scope of annual self-assessment of internal control, identified the risk points and

control points in relevant businesses and management process, formed key points of self-assessment, and

distributed to organizations at all levels for implementation; secondly, at the enterprise level, process level and

information technology level, the Company tested and evaluated the effectiveness of internal control in relevant

areas with such methods and tools as questionnaire, seminar, walk-through test and control test, and etc.,

paid high attention to defects found during the evaluation, worked out rectification plan and implemented it in

a timely manner; thirdly, the legal & compliance department followed up the organization and implementation

of self-assessment of internal control by each unit, grasped the Company’s compliance management situation

of internal control, and issued the self-assessment report of internal control of the management; and fourthly,

on the basis of self-assessment of the management, the audit department continuously supervised the

implementation of various internal control measures, finished the Company’s annual self-assessment report of

internal control, submitted to the board of directors for review, and then disclosed to the public.

The Company laid stress on the culture of internal control compliance and operating risk prevention and

control, consolidated the concept that internal control was everyone’s responsibility, carried out the regulation

orientation “guided by compliance” and “positive motivation”, increased the weight of internal control

compliance indexes, steadily promoted the management integration of compliance, internal control and

operating risk, and perfected the internal control compliance management mechanism. The Company further

standardized the working process of internal control inspection, intensified inspection and management from

multiple dimensions, established evaluation mechanism after inspection, and continuously reinforced the

monitoring and inspection efforts to high risk areas, key businesses, key posts and unusual transactions of

employees. In addition, the Company kept close contact and communication with regulators and Deloitte

Touche Tohmatsu Certified Public Accountants LLP, the external auditor of the Company, strictly followed

the provisions of the regulators with respect to establishment of an internal control system, and ensured

coordination between self-assessment and external audit of internal control.

During the reporting period, no material deficiencies were detected in the mechanism or system of the

Company’s internal control in terms of completeness and reasonableness.

The Company’s board of directors has produced a self-assessment report of internal control. Please refer to

the website of Shanghai Stock Exchange for details.

II. Description of the internal control audit reportThe Company engaged Deloitte Touche Tohmatsu Certified Public Accountants LLP in auditing the

effectiveness of its internal control with regard to the Company’s financial report, and the latter held that

the Company maintained an effective internal control regarding the financial report in all material aspects

in accordance with the Basic Internal Control Norms for Enterprises as well as the relevant provisions as at

December 31, 2013.

104

III. Description of the accountability system regarding material errors in the annual report as well as its implementation

The Company continuously enhanced its management of regular reports disclosure to ensure the truthfulness,

accuracy and completeness of the information disclosed. The contents of regular reports were constantly

enriched and the quality of information disclosure was improved. By releasing the Measures for Accountability

for Material Errors in Annual Report, the Company urged the relevant personnel to exercise diligence and

fully discharge their obligations in information disclosure and comply with the relevant laws and regulations,

accounting standards and disclosure norms, so as to ensure that the financial report gives a true and fair view

of the Company’s financial position and operating results and to prevent any significant errors or omissions in

disclosure of information in the annual report. During the reporting period, there was no material accounting

error or omission, or revision of result forecast.

105

FInanCIaL StatementS

DoCumentS aVaILaBLe FoR InSPeCtIon

The Company’s financial statements 2012 has been audited by Deloitte Touche Tohmatsu Certified Public

Accountants LLP and signed by certified public accountants Tao Jian and Shen Xiaohong, who have issued a

standard and unqualified auditor’s report. For full text of the financial statements, please refer to the appendix.

I. Financial statements bearing the signatures and seals of the Company’s legal representative, president and

financial department director.

II. Original auditor’s report bearing the seal of the accounting firm and personally signed and sealed by

certified public accountants.

III. Original annual reports bearing the signature and seal of chairman of the Company.

IV. All the original documents and announcements publicized by the Company during the reporting period.

V. The articles of association of Industrial Bank Co., Ltd.

Chairman: Gao Jianping

Board of Directors of Industrial Bank Co., Ltd.

March 28, 2014

106

CONTENTS

Auditor’s report 107

The bank’s and consolidated balance sheets 108

The bank’s and consolidated income statements 110

The bank’s and consolidated cash flow statements 111

The consolidated statement of changes in shareholders’ equity 112

The bank’s statement of changes in shareholders’ equity 114

Notes to the financial statements 115

APPENDIX: FINANCIAL STATEMENTS AND AUDITOR’S REPORT

107

De Shi Bao (Shen) Zi (14) No. P0628

[Translation]

To the Shareholders of Industrial Bank Co., Ltd.

We have audited the accompanying financial statements of Industrial Bank Co., Ltd. (the “Bank”) and its subsidiaries (hereinafter collectively refered to as the “Group”), which comprise the Bank’s and consolidated balance sheets as at 31 December 2013, and the Bank’s and consolidated income statements, the Bank’s and consolidated statements of changes in shareholders’ equity and the Bank’s and consolidated cash flow statements for the year ended, and the notes to the financial statements.

1.Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements. The responsibilities include: (1) preparing the financial statements in accordance with Accounting Standards for Business Enterprises to achieve fair presentation of the financial statements; (2) designing, implementing and maintaining internal control which is necessary so enable that the financial statements are free from material misstatements, whether the material misstatements are due to fraud or error.

2.Auditor’s responsibility

Our responsibility is to express an audit opinion on these financial statements based on our auditing work. We conducted our audit in accordance with China Standards on Auditing. China Standards on Auditing require that we comply with the Code of Ethics for Chinese Certified Public Accountants, planning and performing the audit to obtain reasonable assurance about the fact of whether the financial statements are free from material misstatement.

An audit includes performing audit procedures to obtain audit evidence about the amounts and disclosures in financial statements. The procedures selected are depended on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. While making those risk assessments, Certified Public Accountants consider the internal controls relevant to the preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

3.Opinion

In our opinion, the financial statements of the Bank present fairly, in all material respects, the Bank’s and consolidated financial position as of 31 December 2013, and the Bank’s and consolidated results of operations and cash flows for the year then ended in accordance with Accounting Standards for Business Enterprises.

AUDITOR’S REPORT

Deloitte Touche Tohmatsu CPA LLP

Shanghai, China

Chinese Certified Public Accountant

Tao Jian

Shen Xiaohong

28 March 2014

The auditors’ report and the accompanying financial statements are English translations of the Chinese auditors’ report and statutory financial

statements prepared under accounting principles and practices generally accepted in the People’s Republic of China. These financial

statements are not intended to present the financial position and results of operations in accordance with accounting principles and practices

generally accepted in other countries and jurisdictions. In case the English version does not conform to the Chinese version, the Chinese

version prevails.

108

THE BANK’S AND CONSOLIDATED BALANCE SHEETS

UNIT: RMB MillionAT 31 DECEMBER 2013

Note VIII

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Assets

Cash and balances with central bank 1 422,871 391,631 422,683 391,433

Due from banks and other financial institutions 2 62,845 164,642 62,313 164,633

Precious metals 276 4,976 276 4,976

Placements with banks and other

financial institutions 3 87,091 214,812 87,177 214,812

Held-for-trading financial assets 4 42,295 21,540 42,267 21,540

Derivative financial assets 5 6,414 3,266 6,414 3,266

Financial assets held under resale agreements 6 921,090 792,797 921,090 792,797

Interest receivable 7 23,249 19,535 23,146 19,482

Loans and advances to customers 8 1,320,682 1,204,542 1,320,682 1,204,394

Available-for-sale financial assets 9 263,681 192,057 261,104 190,084

Held-to-maturity investments 10 117,655 69,199 117,655 69,199

Debt securities classified as receivables 11 328,628 111,360 326,963 110,178

Finance lease receivables 12 46,094 33,779 - -

Long-term equity investments 13 1,682 1,494 9,662 7,532

Fixed assets 14 7,276 6,656 7,234 6,624

Construction in progress 15 3,481 2,731 3,476 2,731

Intangible assets 530 250 517 245

Goodwill 16 446 446 - -

Deferred tax assets 17 10,107 4,936 9,830 4,796

Other assets 18 11,042 10,326 5,146 4,771

Total assets 3,677,435 3,250,975 3,627,635 3,213,493

109

UNIT: RMB MillionAT 31 DECEMBER 2013

Note VIII

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Liabilities

Due to banks and other financial institutions 20 1,007,544 894,436 1,009,420 895,490

Placements from banks and other financial institutions

21 78,272 88,389 40,627 57,679

Held-for-trading financial liabilities 22 1,216 - 1,216 -

Derivative financial liabilities 5 6,864 2,996 6,864 2,996

Financial assets sold under repurchase agreements

23 81,781 161,862 78,656 161,862

Due to customers 24 2,170,345 1,813,266 2,170,345 1,813,266

Employee benefits payable 25 9,213 7,435 8,862 7,243

Tax payable 26 12,103 9,556 11,753 9,309

Interest payable 27 26,317 18,895 26,098 18,629

Debt securities issued 28 67,901 68,969 67,901 68,969

Other liabilities 29 14,708 14,536 9,215 9,885

Total liabilities 3,476,264 3,080,340 3,430,957 3,045,328

Shareholders’ equity

Share capital 30 19,052 12,702 19,052 12,702

Capital reserve 31 46,242 50,021 46,478 50,244

Surplus reserve 32 9,824 6,648 9,824 6,648

General and regulatory reserve 33 31,325 28,923 31,325 28,923

Retained earnings 34 93,326 71,283 89,999 69,648

Equity attributable to equity holders

of the Bank 199,769 169,577 196,678 168,165

Minority interests 1,402 1,058 - -

Total shareholders’ equity 201,171 170,635 196,678 168,165

Total liabilities and shareholders’ equity 3,677,435 3,250,975 3,627,635 3,213,493

The accompanying notes form part of the financial statements.

The financial statements on pages 108 to 229 were signed by the following:

Gao Jianping Li Renjie Li Jian

Chairman of the Board

Legal Representative

Director

President

Person in Charge of the

Accounting Body

Financial Director

110

THE BANK’S AND CONSOLIDATED INCOME STATEMENTS

UNIT: RMB MillionFOR THE YEAR ENDED 31 DECEMBER 2013

Note VIII

The Group The Bank

2013 2012 2013 2012

1. Operating income 109,287 87,619 105,330 84,678

Net interest income 35 85,845 72,193 84,157 70,755

Interest income 35 189,602 155,755 186,107 153,005

Interest expense 35 (103,757) (83,562) (101,950) (82,250)

Net fee and commission income 36 23,762 14,947 21,644 13,544

Fee and commission income 36 24,736 15,681 22,620 14,269

Fee and commission expense 36 (974) (734) (976) (725)

Investment income (losses) 37 22 (346) (127) (445)

Including: income from investments in an associate 248 221 240 221

Gains (losses) from changes in fair values 38 (1,142) 339 (1,142) 339

Foreign exchange gains 744 439 742 439

Other operating income 56 47 56 46

2. Operating expenses (55,209) (41,551) (53,789) (40,504)

Business taxes and levies 39 (7,831) (5,748) (7,620) (5,586)

General and administrative expenses 40 (28,757) (22,877) (28,045) (22,405)

Impairment losses of assets 41 (18,188) (12,382) (17,691) (11,969)

Other operating expenses (433) (544) (433) (544)

3. Operating profit 54,078 46,068 51,541 44,174

Add: Non-operating income 42 313 187 196 156

Less: Non-operating expenses 43 (130) (62) (128) (60)

4. Profit before tax 54,261 46,193 51,609 44,270

Less: Income tax expenses 44 (12,750) (11,266) (12,090) (10,782)

5. Net profit 41,511 34,927 39,519 33,488

Attributable to:

Equity holders of the Bank 41,211 34,718 39,519 33,488

Minority interests 300 209 - -

6. Earnings per share:

Basic earnings per share (RMB Yuan) 45 2.16 2.15 - -

Diluted earnings per share (RMB Yuan) 45 2.16 2.15 - -

7. Other comprehensive income 46 (3,785) 176 (3,766) 162

8. Total comprehensive income 37,726 35,103 35,753 33,650

Attributable to:

Equity holders of the Bank 37,432 34,890 35,753 33,650

Minority interests 294 213 - -

111

UNIT: RMB MillionFOR THE YEAR ENDED 31 DECEMBER 2013

THE BANK’S AND CONSOLIDATED CASH FLOW STATEMENTS

Note VIII

The Group The Bank

2013 2012 2013 2012

Cash flows from operating activities: Net increase in due to customers and due to banks and other financial institutions 470,187 735,592 471,009 733,572 Net increase in placements from banks and other financial institutions and financial assets sold under repurchase agreements - 56,073 - 45,693 Cash receipts from interest, fee and commission 178,022 151,429 173,024 147,877 Other cash receipts relating to operating activities 2,950 1,273 2,372 745Sub-total of cash inflows from operating activities 651,159 944,367 646,405 927,887 Net increase in loans and advances to customers 132,282 247,225 132,432 247,276 Net increase in finance leases 12,174 11,759 - - Net increase in balances with central bank and due from banks and other financial institutions 1,895 142,983 1,907 143,007 Net increase in placements with banks and other financial institutions and financial assets held under resale agreements 61,900 308,288 61,986 308,288 Net decrease in placements from banks and other financial institutions and financial assets sold under repurchase agreements 90,198 - 100,258 - Cash payments to interest, fee and commission 94,187 76,607 92,273 75,332 Cash payments to and on behalf of employees 15,526 11,195 15,223 10,986 Cash payments of various types of taxes 22,127 15,172 21,175 14,503 Other cash payments relating to operating activities 11,751 14,437 11,512 14,244Sub-total of cash outflows from operating activities 442,040 827,666 436,766 813,636Net cash flow from operating activities 47 209,119 116,701 209,639 114,251Cash flows from investing activities: Cash receipts from recovery of investments 875,425 784,940 775,068 698,473 Cash receipts from investment income 32,186 12,147 31,811 11,908 Cash receipts from disposals of fixed assets, intangible assets and other long-term assets 99 368 99 368 Other cash receipts relating to investing activities 2,287 3 2,287 -Sub-total of cash inflows from investing activities 909,997 797,458 809,265 710,749Net cash payments to acquire investments 1,230,147 922,156 1,128,646 833,109 Cash payments for acquisitions of subsidiaries and other business units - - 1,950 - Net cash payments to acquire fixed assets, intangible assets and other long-term assets 4,144 3,415 3,958 3,404 Other cash payments relating to investing activities 1,060 5 1,060 -Sub-total of cash outflows from investing activities 1,235,351 925,576 1,135,614 836,513Net cash flow from investing activities (325,354) (128,118) (326,349) (125,764)Cash flows from financing activities: Cash receipts from capital contributions 50 23,672 - 23,672 Including: cash receipts from capital contributions from minority owners of subsidiary 50 - - - Cash receipts from issue of bonds 3,000 - 3,000 -Sub-total of cash inflows from financing activities 3,050 23,672 3,000 23,672 Cash repayments of borrowings 4,080 12,000 4,080 12,000 Cash payments for distribution of dividends or profits or settlement of interest expenses 10,413 7,718 10,413 7,631 Including: payments for distribution of dividends to minority owners of subsidiary - 88 - - Other cash payments relating to financing activities 139 - 139 -Sub-total of cash outflows from financing activities 14,632 19,718 14,632 19,631Net cash flow from financing activities (11,582) 3,954 (11,632) 4,041Effect of foreign exchange rate changes on cash and cash equivalents (195) (49) (195) (49)Net decrease in cash and cash equivalents 47 (128,012) (7,512) (128,537) (7,521)Add: Opening balance of cash and cash equivalents 255,133 262,645 255,122 262,643Closing balance of cash and cash equivalents 47 127,121 255,133 126,585 255,122

112

THE CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

UNIT: RMB MillionFOR THE YEAR ENDED 31 DECEMBER 2013

Note VIII

Attributable to owners of the Bank

Minority interests

TotalShare capital

Capital reserve

Surplus reserve

General and

regulatory reserve

Retained earnings

As at 1 January 2013 12,702 50,021 6,648 28,923 71,283 1,058 170,635

Changes for the year

(I) Net profit - - - - 41,211 300 41,511

(II) Other comprehensive income 46 - (3,779) - - - (6) (3,785)

Subtotal - (3,779) - - 41,211 294 37,726

(III) Capital contribution from owners - - - - - 50 50

(IV) Profit distribution 6,350 - 3,176 2,402 (19,168) - (7,240)

1. Transfer to surplus reserve - - 3,176 - (3,176) - -

2. Transfer to general and

regulatory reserve - - - 2,402 (2,402) - -

3. Distribution of dividends 6,350 - - - (13,590) - (7,240)

As at 31 December 2013 19,052 46,242 9,824 31,325 93,326 1,402 201,171

113

UNIT: RMB MillionFOR THE YEAR ENDED 31 DECEMBER 2013

Attributable to owners of the Bank

MinorityinterestsNote

VIIIShare capital

Capital reserve

Surplus reserve

General and

regulatory reserve

Retained earnings

Total

As at 1 January 2012 10,786 28,296 5,913 13,787 56,427 869 116,078

Changes for the year

(I) Net profit - - - - 34,718 209 34,927

(II)Other comprehensive income 46 - 172 - - - 4 176

Subtotal - 172 - - 34,718 213 35,103

(III) Capital contribution from owners 1,916 21,617 - - - - 23,533

(IV) Profit distribution - - 735 15,136 (19,862) (24) (4,015)

1. Transfer to surplus reserve - - 735 - (735) - -

2. Transfer to general and

regulatory reserve - - - 15,136 (15,136) - -

3. Distribution of dividends - - - - (3,991) - (3,991)

4. Distribution of dividends

to minority owners - - - - - (24) (24)

(V) Others - (64) - - - - (64)

As at 31 December 2012 12,702 50,021 6,648 28,923 71,283 1,058 170,635

114

THE BANK’S STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

UNIT: RMB Million

UNIT: RMB Million

FOR THE YEAR ENDED 31 DECEMBER 2013

FOR THE YEAR ENDED 31 DECEMBER 2013

Note VIII

Share capital

Capital reserve

Surplus reserve

General andregulatory

reserve

Retained earnings

Total

As at 1 January 2013 12,702 50,244 6,648 28,923 69,648 168,165

Changes for the year

(I) Net profit - - - - 39,519 39,519

(II) Other comprehensive income 46 - (3,766) - - - (3,766)

Subtotal - (3,766) - - 39,519 35,753

(III) Capital contribution from owners - - - - - -

(IV) Profit distribution 6,350 - 3,176 2,402 (19,168) (7,240)

1. Transfer to surplus reserve - - 3,176 - (3,176) -

2. Transfer to general and

regulatory reserve - - - 2,402 (2,402) -

3. Distribution of dividends 6,350 - - - (13,590) (7,240)

As at 31 December 2013 19,052 46,478 9,824 31,325 89,999 196,678

Note VIII

Share capital

Capital reserve

Surplus reserve

General andregulatory

reserve

Retained earnings

Total

As at 1 January 2012 10,786 28,465 5,913 13,787 56,022 114,973

Changes for the year

(I) Net profit - - - - 33,488 33,488

(II) Other comprehensive income 46 - 162 - - - 162

Subtotal - 162 - - 33,488 33,650

(III) Capital contribution from owners 1,916 21,617 - - - 23,533

(IV) Profit distribution - - 735 15,136 (19,862) (3,991)

1. Transfer to surplus reserve - - 735 - (735) -

2. Transfer to general and

regulatory reserve - - - 15,136 (15,136) -

3. Distribution of dividends - - - - (3,991) (3,991)

As at 31 December 2012 12,702 50,244 6,648 28,923 69,648 168,165

The accompanying notes form part of the financial statements.

115

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2013

I. GENERAL INFORMATIONIndustrial Bank Co., Ltd. (hereinafter referred to as “the Bank”) which was referred to as Fujian Industrial Bank

Co., Ltd. previously, is a joint-stock commercial bank approved by the People’s Bank of China (the “PBOC”),

with the document YF [1988] No. 347 issued on 20 July 1988, in accordance with the Application by Fujian

Province for Deepening Reform and Opening and Accelerating the Development of Export-oriented Economy

(GH [1988] No.58) approved by the State Council. The Bank started trading on Shanghai Stock Exchange on

5 February 2007 with the stock code 601166.

The Bank has obtained its license for carrying out financial activities from China Banking Regulatory

Commission (the “CBRC”) with the license number of No. B0013H135010001. The Bank’s business license

was approved by Fujian Provincial Administration of Industry and Commerce with the registration number

of 350000100009440, the registered address is 154 Hudong Road, Fuzhou, Fujian Province. The legal

representative of the Bank is Mr. Gao Jianping.

The principal activities of the Bank comprise the provision of banking service, which includes accepting

deposits from the public; granting short-term, medium-term and long-term loans; settlement services; issuance

of discounted bills and notes; issuing financial bonds; issue and encashment, underwriting and trading of

government bonds; trading of government and financial bonds and debentures; underwriting and trading of

securities except stock; asset management; inter-bank lending and borrowings; foreign exchange; bank card

business; letters of credit and letters of guarantee; remittance and insurance agent services; safety deposit

box services; financial advisory services; credit investigation, advisory and attestation services and other

banking activities approved by the CBRC.

The principal activities of the Bank’s subsidiaries comprise financial leasing, operating leasing, trust services,

fund raising and marketing, asset management for specific clients, asset management, equity investment,

industrial investment, investment management and consulting; other banking activities approved by the CBRC

as well as other businesses permitted by China Securities Regulatory Commission.

II. BASIS OF PREPARATION OF FINANCIAL STATEMENTSThe Bank and its subsidiaries (hereinafter referred to as “the Group”) has adopted the Accounting Standards

for Business Enterprises (the “ASBE”) issued by the Ministry of Finance (the “MoF”) on 15 February 2006.

In addition, the Group has disclosed relevant financial information in accordance with Information Disclosure

and Presentation Rules for Companies Offering Securities to the Public No. 15- General Provisions on

Financial Reporting (Revised in 2010) and the relevant regulations released by the China Securities

Regulatory Commission.

Basis of accounting and principle of measurement

The Group has adopted the accrual basis of accounting. Except for certain financial instruments which are

measured at fair value, the Group adopts the historical cost as the principle of measurement in the financial

statements. Where assets are impaired, provisions for asset impairment are made in accordance with relevant

requirements.

116

III. STATEMENT OF COMPLIANCE WITH THE ASBEThe financial statements of the Bank have been prepared in accordance with ASBE, and present truly and

completely, the Bank’s and consolidated financial position as of 31 December 2013, and the Bank’s and

consolidated results of operations and cash flows for the year then ended.

IV. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

1. Accounting period

The Group has adopted the calendar year as its accounting year, i.e. from 1 January to 31 December.

2. Functional currency

Renminbi (“RMB”) is the currency of the primary economic environment in which the Bank and its subsidiaries

operate. Therefore, the Bank and its subsidiaries choose RMB as their functional currency. The Group adopts

RMB to prepare its financial statements.

3. The accounting treatment of business combinations involving enterprises under common control and business combinations not involving enterprises under common control

Business combinations are classified into business combinations involving enterprises under common control

and business combinations not involving enterprises under common control.

3.1 Business combinations involving enterprises under common control

A business combination involving enterprises under common control is a business combination in which all

of the combining enterprises are ultimately controlled by the same party or parties both before and after the

combination, and that control is not transitory. The Group has no business combination involving enterprises

under common control in the reporting period.

3.2 Business combinations not involving enterprises under common control and goodwill

A business combination not involving enterprises under common control is a business combination in which

all of the combining enterprises are not ultimately controlled by the same party or parties before and after the

combination.

The cost of combination is the aggregation of the fair values, at the acquisition date, of the assets given,

liabilities incurred or assumed, and the equity securities issued by the acquirer in exchange for control of the

acquiree. The intermediary expenses incurred by the acquirer in respect of auditing, legal services, valuation

and consultancy services, etc. and other associated administrative expenses attributable to the business

combination are recognised in profit or loss when they are incurred. Where a business combination not

involving enterprises under common control is achieved in stages that involve multiple transactions, the cost

of combination is the sum of the consideration paid at the acquisition date and the fair value at the acquisition

date of the acquirer’s previously held interest in the acquiree. The equity interest in the acquiree held before

117

the acquisition date is remeasured at its fair value at the acquisition date, with any difference between its fair

value and its carrying amount being recognised as investment income. The other comprehensive income of

the acquiree before the acquisition date relating to the previously held interest in the acquiree is transferred to

investment income.

The acquiree’s identifiable assets, liabilities and contingent liabilities acquired by the acquirer in a business

combination that meet the recognition criteria shall be measured at fair value at the acquisition date. Where

the cost of combination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net

assets, the difference is treated as an asset and recognised as goodwill, which is measured at cost on initial

recognition. Where the cost of combination is less than the acquirer’s interest in the fair value of the acquiree’s

identifiable net assets, the acquirer firstly reassesses the measurement of the fair values of the acquiree’s

identifiable assets, liabilities and contingent liabilities and measurement of the cost of combination. If after that

reassessment, the cost of combination is still less than the acquirer’s interest in the fair value of the acquiree’s

identifiable net assets, the acquirer recognises the remaining difference immediately in profit or loss for the

current period.

Goodwill arising on a business combination is measured at cost less accumulated impairment losses, and is

presented separately in the consolidated financial statements. It is tested for impairment at least at the end of

each year.

For the purpose of impairment testing, goodwill is considered together with the related assets group(s), i.e.,

goodwill is reasonably allocated to the related assets group(s) or each of assets group(s) expected to benefit

from the synergies of the combination. An impairment loss is recognised if the recoverable amount of the

assets group or sets of assets groups (including goodwill) is less than its carrying amount. The impairment

loss is firstly allocated to reduce the carrying amount of any goodwill allocated to such assets group or sets of

assets groups, and then to the other assets of the group pro-rata on the basis of the carrying amount of each

asset (other than goodwill) in the group.

The recoverable amount of an asset is the higher of its fair value less costs of disposal and the present value

of the future cash flows expected to be derived from the asset. An asset’s fair value is the price in a sale

agreement in an arm’s length transaction. If there is no sale agreement but an asset is traded in an active

market, fair value is the current bid price. If there is no sale agreement or active market for an asset, fair

value is assessed based on the best information available. Costs of disposal include legal costs related to

the disposal of the asset, related taxes, costs of removing the asset and direct costs to bring the asset into

condition for its sale. The present value of expected future cash flows of an asset shall be determined by

estimating the future cash flows to be derived from continuing use of the asset and from its ultimate disposal

and applying the appropriate discount rate to those future cash flows.

The impairment of goodwill is recognised in profit or loss for the period in which it is incurred and will not be

reversed in any subsequent period.

4. Preparation of consolidated financial statements

The scope of consolidation in the consolidated financial statements is determined on the basis of control.

Control is the power to govern the financial and operating policies of an enterprise so as to obtain benefits

from its operating activities.

The significant accounting policies and accounting periods adopted by the subsidiaries are determined based

on the uniform accounting policies and accounting periods set out by the Bank.

All significant intra-group balances and transactions are eliminated on consolidation.

118

The portion of subsidiaries’ equity that is not attributable to the Company is treated as minority interests and

presented as “minority interests” in the consolidated balance sheet within shareholders’ equity. The portion

of net profits or losses of subsidiaries for the period attributable to minority interests is presented as “minority

interests” in the consolidated income statement below the “net profit” line item.

When the amount of loss for the period attributable to the minority shareholders of a subsidiary exceeds the

minority shareholders’ portion of the opening balance of owners’ equity of the subsidiary, the excess amount

are still allocated against minority interests.

Acquisition of minority interests or disposal of interest in a subsidiary that does not result in the loss of

control over the subsidiary is accounted for as equity transactions. The carrying amounts of the Company’s

interests and minority interests are adjusted to reflect the changes in their relative interests in the subsidiary.

The difference between the amount by which the minority interests are adjusted and the fair value of the

consideration paid or received is adjusted to capital reserve under owners’ equity. If the capital reserve is not

sufficient to absorb the difference, the excess are adjusted against retained earnings.

When the Group loses control over a subsidiary due to disposal of certain equity interest or other reasons,

any retained interest is re-measured at its fair value at the date when control is lost. The difference between

(i) the aggregate of the consideration received on disposal and the fair value of any retained interest and (ii)

the share of the former subsidiary’s net assets cumulatively calculated from the acquisition date according to

the original proportion of ownership interest is recognised as investment income in the period in which control

is lost. Other comprehensive income associated with investment in the former subsidiary is reclassified to

investment income in the period in which control is lost.

5. Recognition criteria of cash and cash equivalents

Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash equivalents are

the Group’s short-term, highly liquid investments that are readily convertible to known amounts of cash and

which are subject to an insignificant risk of changes in value.

6. Transactions denominated in foreign currencies

A foreign currency transaction is recorded, on initial recognition, by applying the spot exchange rate on

the date of the transaction. At the balance sheet date, foreign currency monetary items are translated into

functional currency using the spot exchange rates at the balance sheet date. Exchange differences arising

from the differences between the spot exchange rates prevailing at the balance sheet date and those on

initial recognition or at the previous balance sheet date are recognised in profit or loss for the period, except

that exchange differences arising from changes in the carrying amounts (other than the amortised cost) of

available-for-sale monetary items are recognised as other comprehensive income and included in capital

reserve.

Foreign currency non-monetary items measured at historical cost are translated to the amounts in functional

currency at the spot exchange rates on the dates of the transactions and the amounts in functional currency

remain unchanged. Foreign currency non-monetary items measured at fair value are re-translated at the

spot exchange rate on the date the fair value is determined. Difference between the re-translated functional

currency amount and the original functional currency amount is treated as changes in fair value (including

changes of exchange rate) and is recognised in profit and loss or as other comprehensive income included in

capital reserve.

119

7. Financial instruments

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual

provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. For

financial assets and financial liabilities at fair value through profit or loss, transaction costs are immediately

recognised in profit or loss. For other financial assets and financial liabilities, transaction costs are included in

their initial recognised amounts.

7.1 Determination of fair value

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable,

willing parties in an arm’s length transaction. For a financial instrument which has an active market, the Group

uses the quoted price in the active market to establish its fair value. For a financial instrument which has no

active market, the Group establishes fair value by using a valuation technique. Valuation techniques include

using recent arm’s length market transactions between knowledgeable, willing parties, reference to the current

fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing

models.

7.2 Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset or a financial

liability (or a group of financial assets or financial liabilities) and of allocating the interest income or interest

expense over the relevant period, using the effective interest rate. The effective interest rate is the rate that

exactly discounts estimated future cash flows through the expected life of the financial asset or financial

liability or, where appropriate, a shorter period to the net carrying amount of the financial asset or financial

liability.

When calculating the effective interest rate, the Group estimates future cash flows considering all contractual

terms of the financial asset or financial liability (without considering future credit losses), and also considers all

fees paid or received between the parties to the contract giving rise to the financial asset and financial liability

that are an integral part of the effective interest rate, transaction costs, and premiums or discounts, etc.

7.3 Classification, recognition and measurement of financial assets

On initial recognition, the Group’s financial assets are classified into one of the four categories, including

financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables, and

available-for-sale financial assets. All regular way purchases or sales of financial assets are recognised and

derecognised on a trade date basis.

7.3.1 Financial Assets at Fair Value through Profit or Loss (“FVTPL”)

Financial assets at FVTPL include financial assets held for trading and those designated as at fair value

through profit or loss. The Group’s financial assets at FVTPL are all financial assets held for trading.

A financial asset is classified as held for trading if one of the following conditions is satisfied: (1) It has been

acquired principally for the purpose of selling in the near term or repurchasing; or (2) On initial recognition it

is part of a portfolio of identified financial instruments that the Group manages together and there is objective

evidence that the Group has a recent actual pattern of short-term profit-taking; or (3) it is a derivative that

is not designated and effective hedging instrument, or a financial guarantee contract, or a derivative that is

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linked to and must be settled by delivery of an unquoted equity instrument (without a quoted price in an active

market) whose fair value cannot be reliably measured.

Financial assets held for trading are subsequently measured at fair value. Any gains or losses arising from

changes in the fair value and any dividend or interest income earned on the financial assets are recognised in

profit or loss.

7.3.2 Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed

maturity dates that the Group’s management has the positive intention and ability to hold to maturity.

Held-to-maturity investments are subsequently measured at amortised cost using the effective interest

method. Gain or loss arising from derecognition, impairment or amortisation is recognised in profit or loss.

7.3.3 Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are

not quoted in an active market. Financial assets classified as loans and receivables by the Group include

balances with central bank, due from banks and other financial institutions, placements with banks and other

financial institutions, financial assets held under resale agreements, interest receivables, loans and advances

to customers, debt securities classified as receivables, finance lease receivables and other receivables.

Loans and receivables are subsequently measured at amortised cost using the effective interest method. Gain

or loss arising from derecognition, impairment or amortisation is recognised in profit or loss.

7.3.4 Available-for-sale financial assets

Available-for-sale financial assets include non-derivative financial assets that are designated on initial

recognition as available for sale, and financial assets that are not classified as financial assets at fair value

through profit or loss, loans and receivables or held-to-maturity investments.

Available-for-sale financial assets are subsequently measured at fair value, and gains or losses arising from

changes in the fair value are recognised as other comprehensive income and included in the capital reserve,

except that impairment losses and exchange differences related to amortised cost of monetary financial assets

denominated in foreign currencies are recognised in profit or loss, until the financial assets are derecognised,

at which time the gains or losses are released and recognised in profit or loss.

Interests obtained and the dividends declared by the investee during the period in which the available-for-sale

financial assets are held, are recognised in interest income and investment gains, respectively.

For investments in equity instruments that do not have a quoted market price in an active market and whose

fair value cannot be reliably measured, and derivative financial assets that are linked to and must be settled

by delivery of such unquoted equity instruments, they are measured at cost.

7.4 Impairment of financial assets

The Group assesses at each balance sheet date the carrying amounts of financial assets other than those

at fair value through profit or loss. If there is objective evidence that a financial asset is impaired, the Group

determines the amount of any impairment loss. Objective evidence that a financial asset is impaired is

evidence that, arising from one or more events that occurred after the initial recognition of the asset, the

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estimated future cash flows of the financial asset, which can be reliably measured, have been affected.

Objective evidence that a financial asset is impaired includes the following observable events:

(1) Significant financial difficulty of the issuer or obligor;

(2) A breach of contract by the borrower, such as a default or delinquency in interest or principal payments;

(3) The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting a

concession to the borrower;

(4) It becoming probable that the borrower will enter bankruptcy or other financial reorganisations;

(5) The disappearance of an active market for that financial asset because of financial difficulties of the issuer;

(6) Upon an overall assessment of a group of financial assets, observable data indicates that there is a

measurable decrease in the estimated future cash flows from the group of financial assets since the initial

recognition of those assets, although the decrease cannot yet be identified with the individual financial assets

in the group. Such observable data includes:

- Adverse changes in the payment status of borrower in the group of assets;

- Economic conditions in the country or region of the borrower which may lead to a failure to pay the group of

assets;

(7) Significant adverse changes in the technological, market, economic or legal environment in which the

issuer operates, indicating that the cost of the investment in the equity instrument may not be recovered by the

investor;

(8) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

(9) Other objective evidence indicating there is an impairment of a financial asset.

7.4.1 Impairment of financial assets measured at amortised cost

If financial assets carried at amortised cost are impaired, the carrying amounts of the financial assets are

reduced to the present value of estimated future cash flows (excluding future credit losses that have not

been incurred) discounted at the financial asset’s original effective interest rate. The amount of reduction is

recognised as an impairment loss in profit or loss. If, subsequent to the recognition of an impairment loss on

financial assets carried at amortised cost, there is objective evidence of a recovery in value of the financial

assets which can be related objectively to an event occurring after the impairment is recognised, the previously

recognised impairment loss is reversed. However, the reversal is made to the extent that the carrying amount

of the financial asset at the date the impairment is reversed does not exceed what the amortised cost would

have been had the impairment not been recognised.

For a financial asset that is individually significant, the Group assesses the asset individually for impairment.

For a financial asset that is not individually significant, the Group assesses the asset individually for

impairment or includes the asset in a group of financial assets with similar credit risk characteristics and

collectively assesses them for impairment. If the Group determines that no objective evidence of impairment

exists for an individually assessed financial asset (whether significant or not), it includes the asset in a group

of financial assets with similar credit risk characteristics and collectively reassesses them for impairment.

Assets for which an impairment loss is individually recognised are not included in a collective assessment of

impairment.

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7.4.2 Impairment of available-for-sale financial assets

Objective evidence that an available-for-sale financial asset is impaired includes significant or prolonged

decline in the fair value of an investment in an equity instrument below its cost. The Group assesses each

available-for-sale financial asset individually on balance sheet date, and recognizes 50%(including) decline

or above in the fair value below its cost as significant, and 12-month or above decline below its cost as

prolonged.

When an available-for-sale financial asset is impaired, the cumulative loss arising from decline in fair value

previously recognised directly in capital reserve is reclassified from the capital reserve to profit or loss. The

amount of the cumulative loss that is reclassified from capital reserve to profit or loss is the difference between

the acquisition cost (net of any principal repayment and amortisation) and the current fair value, less any

impairment loss on that financial asset previously recognised in profit or loss.

If, subsequent to the recognition of an impairment loss on available-for-sale financial assets, there is objective

evidence of a recovery in value of the financial assets which can be related objectively to an event occurring

after the impairment is recognised, the previously recognised impairment loss is reversed. The amount of

reversal of impairment loss on available-for-sale equity instruments is recognised as other comprehensive

income and included in the capital reserve, while the amount of reversal of impairment loss on available-for-

sale debt instruments is recognised in profit or loss.

7.4.3 Impairment of financial assets measured at cost

If an impairment loss has been incurred on an investment in unquoted equity instrument (without a quoted

price in an active market) whose fair value cannot be reliably measured, or on a derivative financial asset that

is linked to and must be settled by delivery of such an unquoted equity instrument, the carrying amount of the

financial asset is reduced to the present value of estimated future cash flows discounted at the current market

rate of return for a similar financial asset. The amount of reduction is recognised as an impairment loss in

profit or loss. The impairment loss on such financial asset is not reversed once it is recognised.

7.5 Transfer of financial assets

The Group derecognises a financial asset if one of the following conditions is satisfied: (1) the contractual

rights to the cash flows from the financial asset expire; or (2) the financial asset has been transferred and

substantially all the risks and rewards of ownership of the financial asset is transferred to the transferee; or (3)

although the financial asset has been transferred, the Group neither transfers nor retains substantially all the

risks and rewards of ownership of the financial asset but has not retained control of the financial asset.

If the Group neither transfers nor retains substantially all the risks and rewards of ownership of a financial

asset, and it retains control of the financial asset, it recognises the financial asset to the extent of its continuing

involvement in the transferred financial asset and recognises an associated liability. The extent of the Group’s

continuing involvement in the transferred asset is the extent to which it is exposed to changes in the value of

the transferred asset.

For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, the difference between

(1) the carrying amount of the financial asset transferred; and (2) the sum of the consideration received from

the transfer and any cumulative gain or loss that has been recognised in other comprehensive income, is

recognised in profit or loss.

If a part of the transferred financial asset qualifies for derecognition, the carrying amount of the transferred

financial asset is allocated between the part that continues to be recognised and the part that is derecognised,

based on the respective fair values of those parts. The difference between (1) the carrying amount allocated

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to the part derecognised; and (2) the sum of the consideration received for the part derecognised and any

cumulative gain or loss allocated to the part derecognised which has been previously recognised in other

comprehensive income, is recognised in profit or loss.

7.6 Classification, recognition and measurement of financial liabilities

Debt and equity instruments issued by the Group are classified into financial liabilities or equity on the basis of

the substance of the contractual arrangements and definitions of financial liability and equity instrument.

On initial recognition, financial liabilities are classified into financial liabilities at fair value through profit or loss

and other financial liabilities.

7.6.1 Financial liabilities at fair value through profit or loss

Financial liabilities at FVTPL consist of financial liabilities held for trading and those designated as at FVTPL

on initial recognition. All Financial liabilities at fair value through profit or loss of the Group are held-for trading

financial liabilities.

A financial liability is classified as held for trading if one of the following conditions is satisfied: (1) It has

been acquired principally for the purpose of repurchasing in the near term; or (2) On initial recognition it is

part of a portfolio of identified financial instruments that the Group manages together and there is objective

evidence that the Group has a recent actual pattern of short-term profit-taking; or (3) It is a derivative, except

for a derivative that is a designated and effective hedging instrument, or a financial guarantee contract, or a

derivative that is linked to and must be settled by delivery of an unquoted equity instrument (without a quoted

price in an active market) whose fair value cannot be reliably measured.

Financial liabilities at FVTPL are subsequently measured at fair value. Any gains or losses arising from

changes in the fair value or any dividend or interest expenses related to the financial liabilities are recognised

in profit or loss.

7.6.2 Other financial liabilities

For a derivative liability that is linked to and must be settled by delivery of an unquoted equity instrument

(without a quoted price in an active market) whose fair value cannot be reliably measured, it is subsequently

measured at cost. Other financial liabilities except those arising from financial guarantee contracts are

subsequently measured at amortised cost using the effective interest method, with gain or loss arising from

derecognition or amortisation recognised in profit or loss.

7.6.3 Financial guarantee contracts and loan commitments

A financial guarantee contract is a contract by which the guarantor and the lender agree that the guarantor

would settle the debts or bear obligations in accordance with terms of the contract in case the borrower fails

to settle the debts. Financial guarantee contracts that are not designated as financial liabilities at fair value

through profit or loss, or loan commitments to provide a loan at a below-market interest rate, which are

not designated at fair value through profit or loss, are initially measured at their fair values less the directly

attributable transaction costs. Subsequent to initial recognition, they are measured at the higher of: (i) the

amount determined in accordance with Accounting Standard for Business Enterprises No. 13 – Contingencies;

and (ii) the amount initially recognised less cumulative amortisation recognised in accordance with the

principles set out in Accounting Standard for Business Enterprises No. 14 – Revenue.

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7.7 Asset securitisation

The Group securitises a portion of financial assets by selling these assets to a special purpose trust, and the

special purpose trust issues assets-backed securities to investors. The Group holds subordinated assets-

backed securities which are not transferrable until the principal and interests of the preference assets-

backed securities have been repaid. The Group acts as an asset service provider to provide services such as

collection of the principal and interests of loans in asset pool, keep account records related to asset pool, and

issue service reports. The trust property, after paying trust taxation and relevant fees, will be firstly used to

repay the principal and interests of the preference assets-backed securities; after fully paid to the holders of

the preference assets-backed securities, the remaining trust property is treated as property of subordinated

assets-backed securities and attributable to the Group and other owners of subordinated assets-backed

securities. Whether the Groups derecognises a financial asset partially or completely depends on the extent of

retaintion of the risks and rewards of those assets transferred to the other entity.

When applying the accounting policy of securitisation of financial assets, the Groups has already taken into

account the extent of transfer of the risks and rewards of those assets transferred to the other entity, as well

as the extent of control over such entity by the Group:

- When the Group has transferred substantially all the risks and rewards of ownership of a financial asset, it

shall derecognise the relevant financial asset;

- When the Group has retained substantially all the risks and rewards of ownership of a financial asset, it shall

continue to recognise the relevant financial asset;

- When the Group neither transfers nor retains substantially all the risks and rewards of ownership of the

financial asset, it shall determine whether it has retained control of the financial asset transferred. If the

Group has not retained control, it shall derecognise the financial asset and recognise the rights retained or

obligations arising from the transfer as an asset or a liability respectively. If the Group has retained control, it

shall recognise the financial asset to the extent of its continuing involvement in the transferred financial asset.

7.8 Derecognition of financial liabilities

The Group derecognises a financial liability (or part of it) only when the underlying present obligation (or part

of it) is discharged. An agreement between the Group (an existing borrower) and an existing lender to replace

the original financial liability with a new financial liability with substantially different terms is accounted for as

an extinguishment of the original financial liability and the recognition of a new financial liability.

When the Group derecognises a financial liability or a part of it, it recognises the difference between the

carrying amount of the financial liability (or part of the financial liability) derecognised and the consideration

paid (including any non-cash assets transferred or new financial liabilities assumed) in profit or loss.

7.9 Derivatives and embedded derivatives

Derivative financial instruments include forward exchange contracts, currency swaps, interest rate swaps and

foreign exchange options, etc. Derivatives are initially measured at fair value at the date when the derivative

contracts are entered into and are subsequently re-measured at fair value. The resulting gain or loss is

recognised in profit or loss.

An embedded derivative is separated from the hybrid instrument, where the hybrid instrument is not

designated as a financial asset or financial liability at fair value through profit or loss, and treated as a

standalone derivative if 1) the economic characteristics and risks of the embedded derivative are not closely

related to the economic characteristics and risks of the host contract; and 2) a separate instrument with the

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same terms as the embedded derivative would meet the definition of a derivative. If the Group is unable to

measure the embedded derivative separately either at acquisition or at a subsequent balance sheet date, it

designates the entire hybrid instrument as a financial asset or financial liability at fair value through profit or

loss.

7.10 Offsetting financial assets and financial liabilities

Where the Group has a legal right that is currently enforceable to set off the recognised financial assets and

financial liabilities, and intends either to settle on a net basis, or to realise the financial asset and settle the

financial liability simultaneously, a financial asset and a financial liability shall be offset and the net amount is

presented in the balance sheet. Except for the above circumstances, financial assets and financial liabilities

shall be presented separately in the balance sheet and shall not be offset.

7.11 Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Group after

deducting all of its liabilities. The consideration received from issuing equity instruments, net of transaction

costs, are added to shareholders’ equity.

All types of distributions (excluding stock dividends) made by the Group to holders of equity instruments are

deducted from shareholders’ equity. The Group does not recognise any changes in the fair value of equity

instruments.

8. Precious metal

Trading precious metal is initially measured at actual amountat acquisition, and subsequently re-measured at

fair value. The resulting gain or loss is recognised in profit or loss.

9. Long-term equity investments

9.1 Determination of investment cost

For a long-term equity investment acquired through a business combination involving enterprises under

common control, the investment cost of the long-term equity investment is the attributable share of the

carrying amount of the shareholders’ equity of the acquiree at the date of combination. For a long-term equity

investment acquired through business combination not involving enterprises under common control, the

investment cost of the long-term equity investment is the cost of acquisition. For a long-term equity investment

acquired through business combination not involving enterprises under common control and achieved in

stages, the investment cost of the long-term equity investment is the aggregate of the carrying amount of the

equity interest held in the acquiree prior to the acquisition date and the cost of the additional investment at the

acquisition date. The long-term equity investment acquired otherwise than through a business combination is

initially measured at its cost.

9.2 Subsequent measurement and recognition of profit or loss

9.2.1 Long-term equity investment accounted for using the cost method

For long-term equity investments over which the Group does not have joint control or significant influence

and without quoted prices in an active market and that fair values cannot be reliably measured, the Group

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accounts for such long-term equity investments using the cost method. Besides, long-term equity investments

in subsidiaries are accounted for using the cost method in the Company’s separate financial statements. A

subsidiary is an investee that is controlled by the Group.

Under the cost method, a long-term equity investment is measured at initial investment cost. Except for cash

dividends or profits already declared but not yet paid that are included in the price or consideration actually

paid upon acquisition of the long-term equity investment, investment income is recognised in the period in

accordance with the attributable share of cash dividends or profit distributions declared by the investee.

9.2.2 Long-term equity investment accounted for using the equity method

The Group accounts for investment in associates and joint ventures using the equity method. An associate is

an entity over which the Group has significant influence and a joint venture is an entity over which the Group

exercises joint control along with other investors.

Under the equity method, where the initial investment cost of a long-term equity investment exceeds the

Group’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, no adjustment

is made to the initial investment cost. Where the initial investment cost is less than the Group’s share of the

fair value of the investee’s identifiable net assets at the time of acquisition, the difference is recognised in

profit or loss for the period, and the cost of the long-term equity investment is adjusted accordingly.

Under the equity method, the Group recognises its share of the net profit or loss of the investee for the period as

investment income or loss for the period. The Group recognises its share of the investee’s net profit or loss based

on the fair value of the investee’s individual separately identifiable assets, etc at the acquisition date after making

appropriate adjustments to conform with the Group’s accounting policies and accounting period. Unrealised

profits or losses resulting from the Group’s transactions with its associates and joint ventures are recognised

as investment income or loss to the extent that those attributable to the Group’s equity interest are eliminated.

However, unrealised losses resulting from the Group’s transactions with its associates and joint ventures which

represent impairment losses on the transferred assets are not eliminated. Changes in owners’ equity of the

investee other than net profit or loss are correspondingly adjusted to the carrying amount of the long-term equity

investment, and recognised as other comprehensive income which is included in the capital reserve.

The Group discontinues recognising its share of net losses of the investee after the carrying amount of

the long-term equity investment together with any long-term interests that in substance form part of its net

investment in the investee is reduced to zero. If the Group has incurred obligations to assume additional

losses of the investee, a provision is recognized according to the expected obligation, and recorded as

investment loss for the period. Where net profits are subsequently made by the investee, the Group resumes

recognising its share of those profits only after its share of the profits exceeds the share of losses previously

not recognised.

9.2.3 Disposal of long-term equity investments

On disposal of a long term equity investment, the difference between the proceeds actually received and

receivable and the carrying amount is recognised in profit or loss for the period. For a long-term equity

investment accounted for using the equity method, the amount included in the shareholders’ equity attributable

to the percentage interest disposed is transferred to profit or loss for the period.

9.3 Basis for determining joint control and significant influence over investee

Control is the power to govern the financial and operating policies of an entity so as to obtain benefits

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from its activities. Joint control is the contractually agreed sharing of control over an economic activity, and

exists only when the strategic financial and operating policy decisions relating to the activity require the

unanimous consent of the parties sharing control. Significant influence is the power to participate in the

financial and operating policy decisions of the investee but is not control or joint control over those policies.

When determining whether an investing enterprise is able to exercise control or significant influence over an

investee, the effect of potential voting rights of the investee (for example, warrants and convertible debts) held

by the investing enterprises or other parties that are currently exercisable or convertible shall be considered.

9.4 Methods of impairment assessment and determining the provision for impairment loss

The Group reviews the long-term equity investments at each balance sheet date to determine whether there is

any indication that they have suffered an impairment loss. If an impairment indication exists, the recoverable

amount is estimated. If such recoverable amount is less than its carrying amount, a provision for impairment

losses in respect of the deficit is recognised in profit or loss for the period.

Once an impairment loss is recognised for a long-term equity investment, it will not be reversed in any

subsequent period.

10. Fixed assets

10.1 Recognition criteria for fixed assets

Fixed assets are tangible assets that are held for use in the production or supply of goods or services, for

rental to others, or for administrative purposes, and have useful lives of more than one accounting year. A

fixed asset is recognised only when it is probable that economic benefits associated with the asset will flow to

the Group and the cost of the asset can be measured reliably. Fixed assets are initially measured at cost.

Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and if it

is probable that economic benefits associated with the asset will flow to the Group and the subsequent

expenditures can be measured reliably. Meanwhile the carrying amount of the replaced part is derecognised.

Other subsequent expenditures are recognised in profit or loss in the period in which they are incurred.

10.2 Depreciation of each category of fixed assets

A fixed asset is depreciated over its useful life using the straight-line method since the month subsequent to

the one in which it is ready for intended use. The depreciation period, estimated net residual value rate and

annual depreciation rate of each category of fixed assets are as follows:

Category Depreciation period(years)Estimated Residual

value rate(%)Annual

depreciation rate (%)

Buildings 20-30 years 0-3 3.23-5.00

Property improvementthe lower of improvement period and

remaining useful life0

Equipment 3-10 years 0-3 10.00-33.33

Transportation vehicles 5-8 years 0-3 12.50-20.00

Estimated net residual value of a fixed asset is the estimated amount that the Group would currently obtain

from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age

and in the condition expected at the end of its useful life.

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10.3 Methods of impairment assessment and determining the provision for impairment losses of fixed assets

The Group assesses at each balance sheet date whether there is any indication that the fixed assets may

be impaired. If there is any indication that such assets may be impaired, recoverable amounts are estimated

for such assets. Recoverable amount is estimated on individual basis. If it is not practical to estimate the

recoverable amount of an individual asset, the recoverable amount of the asset group to which the asset

belongs will be estimated. If the recoverable amount of an asset or an asset group is less than its carrying

amount, the deficit is accounted for as an impairment loss and is recognised in profit or loss for the period.

Once the impairment loss of such assets is recognised, it is not be reversed in any subsequent period.

10.4 Other explanations

The Group reviews the useful life and estimated net residual value rate of a fixed asset and the depreciation

method applied at least once at each financial year-end, and account for any change as a change in an

accounting estimate.

If a fixed asset is upon disposal or no future economic benefits are expected to be generated from its use or

disposal, the fixed asset is derecognised. When a fixed asset is sold, transferred, retired or damaged, the

amount of any proceeds on disposal of the asset net of the carrying amount and related taxes is recognised in

profit or loss for the period.

11. Construction in progress

Construction in progress is measured at its actual costs. The actual costs include various construction

expenditures during the construction period, and other relevant costs. Construction in progress is not

depreciated. Construction in progress is transferred to a fixed asset or a other asset when it is ready for

intended use.

The Group assesses at each balance sheet date whether there is any indication that construction in progress

may be impaired. If there is any indication that such assets may be impaired, recoverable amounts are

estimated for such assets. Recoverable amount is estimated on individual basis. If it is not practical to

estimate the recoverable amount of an individual asset, the recoverable amount of the asset group to which

the asset belongs will be estimated. If the recoverable amount of an asset or an asset group is less than its

carrying amount, the deficit is accounted for as an impairment loss and is recognised in profit or loss for the

period.

Once the impairment loss of construction in progress is recognised, it is not be reversed in any subsequent

period.

12. Intangible assets

12.1 Intangible assets

Intangible assets include land use rights, franchising, etc.

An intangible asset is measured initially at cost. Expenses related to the intangible assets are recognised

in the cost of intangible assets when (i) it is probable that the associated economic benefits will flow to the

Group; and (ii) the associated costs can be measured reliably. Other expenses related to the intangle assets

are recognised in profit or loss for the period in which it is incurred.

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The acquired land use right is recognized as intangible assets. Expenses related to land use right and

construction cost from buildings such as self-built factory, etc. are recognized as intangible assets and fixed

assets, respectively. In the case of purchased buildings, it allocates related cost between land use right and

buildings. If related cost can not be allocated reasonably, it is recognized as fixed assets.

When an intangible asset with a finite useful life is available for use, its original cost is amortised over its

estimated useful life using the straight-line method. An intangible asset with an indefinite useful life is not

amortised.

For an intangible asset with a finite useful life, the Group reviews the useful life and amortisation method at the

end of the period, and account for any change as a change in an accounting estimate. For an intangible asset

with an infinite useful life, the Group reviews the useful life. If there is evidence the duration of associated

economic benefits is predictable, then estimate the useful life and amortize the intangible assets.

12.2 Methods of impairment assessment and determining the provision for impairment losses of intangible assets

The Group assesses at each balance sheet date whether there is any indication that the intangible assets with

a finite useful life may be impaired. If there is any indication that such assets may be impaired, recoverable

amounts are estimated for such assets. Recoverable amount is estimated on individual basis. If it is not

practical to estimate the recoverable amount of an individual asset, the recoverable amount of the asset group

to which the asset belongs will be estimated. If the recoverable amount of an asset or an asset group is less

than its carrying amount, the deficit is accounted for as an impairment loss and is recognised in profit or loss

for the period.

Intangible assets with indefinite useful life and intangible assets not yet available for use are tested for

impairment annually, irrespective of whether there is any indication that the assets may be impaired.

Once the impairment loss of such assets is recognised, it is not be reversed in any subsequent period.

13. Long-term prepaid expenses

Long-term prepaid expenses represent expenses incurred that should be borne and amortised over the

current and subsequent periods (together of more than one year). Long-term prepaid expenses are amortised

using the straight-line method over the expected periods in which benefits are derived.

14. Assets transferred under repurchase agreements

14.1 Financial assets purchased under resale agreements

Financial assets that have been purchased under agreements with a commitment to resell at a specific future

date and price are not recognised in the balance sheet. The cost of purchasing such assets is presented

under “financial assets purchased under resale agreements” in the balance sheet. The difference between the

purchasing price and reselling price is recognised as interest income during the term of the agreement using

the effective interest method.

14.2 Financial assets sold under repurchase agreements

Financial assets sold subject to agreements with a commitment to repurchase at a specific future date and

price are not derecognised in the balance sheet. The proceeds from selling such assets are presented under

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“financial assets sold under repurchase agreements” in the balance sheet. The difference between the selling

price and repurchasing price is recognised as interest expense during the term of the agreement using the

effective interest method.

15. Provisions

Provisions are recognised when the Group has a present obligation related to a contingency, it is probable that

an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can

be measured reliably.

The amount recognised as a provision is the best estimate of the consideration required to settle the present

obligation at the balance sheet date, taking into account factors pertaining to a contingency such as the risks,

uncertainties and time value of money. Where the effect of the time value of money is material, the amount of

the provision is determined by discounting the related future cash outflows.

Where all or some of the expenditure required to settle a provision is expected to be reimbursed by a third

party, the reimbursement is recognised as a separate asset only when it is virtually certain that reimbursement

will be received, and the amount of reimbursement recognised does not exceed the carrying amount of the

provision.

16. Interest income and expense

Interest income and expense is carried at amortised cost of related financial assets and liabilities using the

effective interest method, and recognized in profit or loss. If the difference between effective interest and

contract interest is an insignificant amount, contract interest also can be applied.

17. Fee and commission income

Fee and commission income is recognized on accrual basis when providing related service.

18. Government grants

Government grants are transfer of monetary assets and non-monetary assets from the government to the

Group at no consideration, except the capital from the government as the owner. A government grant is

recognised only when the Group can comply with the conditions attaching to the grant and the Group will

receive the grant.

If a government grant is in the form of a transfer of a monetary asset, it is measured at the amount received or

receivable. If a government grant is in the form of a non-monetary asset, it is measured at fair value. If the fair

value cannot be reliably determined, it is measured at a nominal amount. A government grant measured at a

nominal amount is recognised immediately in profit or loss for the period.

A government grant related to an asset is recognised as deferred income, and evenly amortised to profit

or loss over the useful life of the related asset. For a government grant related to income, if the grant is a

compensation for related expenses or losses to be incurred in subsequent periods, the grant is recognised as

deferred income, and recognised in profit or loss over the periods in which the related costs are recognised.

If the grant is a compensation for related expenses or losses already incurred, the grant is recognised

immediately in profit or loss for the period.

For repayment of a government grant already recognised, if there is related deferred income, the repayment

131

is offset against the carrying amount of the deferred income, and any excess is recognised in profit or loss for

the period. If there is no related deferred income, the repayment is recognised immediately in profit or loss for

the period.

19. Deferred tax assets/deferred tax liabilities

The income tax expenses include current income tax and deferred income tax.

19.1 Current income tax

At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods are

measured at the amount expected to be paid (or recovered) according to the requirements of tax laws.

19.2 Deferred tax assets and deferred tax liabilities

For temporary differences between the carrying amounts of certain assets or liabilities and their tax base, or

between the nil carrying amount of those items that are not recognised as assets or liabilities and their tax

base that can be determined according to tax laws, deferred tax assets and liabilities are recognised using the

balance sheet liability method.

Deferred tax is generally recognised for all temporary differences. Deferred tax assets for deductible temporary

differences are recognised to the extent that it is probable that taxable profits will be available against which

the deductible temporary differences can be utilised. However, for temporary differences associated with the

initial recognition of goodwill and the initial recognition of an asset or liability arising from a transaction (not a

business combination) that affects neither the accounting profit nor taxable profits (or deductible losses) at the

time of transaction, no deferred tax asset or liability is recognised.

For deductible losses and tax credits that can be carried forward, deferred tax assets are recognised to the

extent that it is probable that future taxable profits will be available against which the deductible losses and tax

credits can be utilised.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in

subsidiaries and associates, and interests in joint ventures, except where the Group is able to control

the timing of the reversal of the temporary difference and it is probable that the temporary difference will

not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences

associated with such investments and interests are only recognised to the extent that it is probable that there

will be taxable profits against which to utilise the benefits of the temporary differences and they are expected

to reverse in the foreseeable future. At the balance sheet date, deferred tax assets and liabilities are measured

at the tax rates, according to tax laws, that are expected to apply in the period in which the asset is realised or

the liability is settled.

Current and deferred tax expenses or income are recognised in profit or loss for the period, except when

they arise from transactions or events that are directly recognised in other comprehensive income or in

shareholders equity, in which case they are recognised in other comprehensive income or in shareholders

equity; and when they arise from business combinations, in which case they adjust the carrying amount of

goodwill.

At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it is no longer

probable that sufficient taxable profits will be available in the future to allow the benefit of deferred tax assets

to be utilised. Such reduction in amount is reversed when it becomes probable that sufficient taxable profits

will be available.

When the Group has a legal right to settle on a net basis and intends either to settle on a net basis or to

132

realise the assets and settle the liabilities simultaneously, current tax assets and current tax liabilities are

offset and presented on a net basis.

When the Group has a legal right to settle current tax assets and liabilities on a net basis, and deferred tax

assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the

same taxable entity or different taxable entities which intend either to settle current tax assets and liabilities

on a net basis or to realise the assets and liabilities simultaneously, in each future period in which significant

amounts of deferred tax assets or liabilities are expected to be reversed, deferred tax assets and deferred tax

liabilities are offset and presented on a net basis.

20. Fiduciary activities

The Group acts in a fiduciary capacity as a custodian, trustee or an agent for customers. Customers should

bear the risk and return generated by such activities. The Group only charges fee and commission. Assets

held by the Group and the related undertakings to return such assets to customers are excluded from the

financial statements.

21. Lease

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and

rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessee under operating leases

Operating lease payments are recognised on a straight-line basis over the term of the relevant lease, and are

either included in the cost of related asset or charged to profit or loss for the period. Initial direct costs incurred

are charged to profit or loss for the period. Contingent rents are charged to profit or loss in the period in which

they are actually incurred.

The Group as lessor under operating leases

Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of

the relevant lease. Initial direct costs with more than an insignificant amount are capitalised when incurred,

and are recognised in profit or loss on the same basis as rental income over the lease term. Other initial

direct costs with an insignificant amount are charged to profit or loss in the period in which they are incurred.

Contingent rents are charged to profit or loss in the period in which they actually arise.

The Group as lessor under finance leases

At the commencement of the lease term, the aggregate of the minimum lease receivable at the inception of the

lease and the initial direct costs is recognised as a finance lease receivable, and the unguaranteed residual

value is recorded at the same time. The difference between the aggregate of the minimum lease receivable,

the initial direct costs and the unguaranteed residual value, and the aggregate of their present values is

recognised as unearned finance income. The net amount of financial lease receivables less unearned finance

income is listed in “financial lease receivables” for presentation.

Unearned finance income is recognised as finance income for the period using the effective interest method

over the lease term. Contingent rents are credited to profit or loss in the period in which they are actually

incurred.

133

22. Other significant accounting policies and accounting estimates

22.1 Foreclosed asset

Foreclosed asset is initially measured at its fair value. At the balance sheet date, foreclosed asset is measured

at the lower of carrying amount and net realisable value. The difference by which the net realisable value is

lower than the carrying amount of the assets shall be provided for and recognized in the income statement for

the current period.

On disposal of a foreclosed asset, the difference between (i) income from disposal and (ii) the carrying amount

of the foreclosed asset is charged to non-operating income or expense.

If the foreclosed asset is transferred for self-use, it should be measured at the carrying amount at the transfer

date. Provision is to taken into account if applicable.

22.2 Employee benefits

In an accounting period in which an employee has rendered service to the Group, the Group recognises

the employee benefits for that service as a liability, except for compensation for termination of employment

relationship with the employees.

The Group participates in the employee social security systems, such as basic pensions, medical insurance,

housing funds and other social securities established by the government in accordance with relevant

requirements. The related expenditures are either included in cost of related assets or charged to profit or loss

in the period when they are incurred.

Except for statutory retirement benefit, the Group has set up a pension plan for employees to supplement the

retirement benefit.

When the Group terminates the employment relationship with employees before the expiry of the employment

contracts or provides compensation as an offer to encourage employees to accept voluntary redundancy, if

the Group has a formal plan for termination of employment relationship or has made an offer for voluntary

redundancy which will be implemented immediately, and the Group cannot unilaterally withdraw from the

termination plan or the redundancy offer, a provision for the compensation payable arising from the termination

of employment relationship with employees is recognised with a corresponding charge to the profit or loss for

the period.

134

V. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTYIn the application of the Group’s accounting policies, which are described in Note 4, the management is

required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities

that are not readily apparent from other sources. The estimates and associated assumptions are based on

historical experience and other factors that are considered to be relevant. Actual results may differ from these

estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

estimates are recognised in the period in which the estimate is revised if the revision affects only that period,

or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the critical judgements and key estimation uncertainty that the Group has made at the

balance sheet date.

1. Impairment losses on loans and advances to customers

The Group reviews its loan portfolio to assess impairment on a periodic basis. In determining whether an

impairment loss should be recognised in profi t or loss, the Group makes judgments as to whether there is

any observable data indicating that there is an objective evidence of impairment which will have a measurable

decrease in the estimated future cash flows from a portfolio of loans and advances. When the decrease may

not have been identified individually or the individual loan is not significant, management uses estimates

based on historical loss experience on a collective basis with similar credit risk characteristics to assess the

impairment loss while estimating expected future cash flows. The methodology and assumptions used for

estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences

between loss estimates and actual loss experience.

2. Fair value of financial instruments

The Group uses valuation technique for financial instruments which are not quoted in an active market.

Valuation techniques include the use of discounted cash flows analysis, option pricing models or other

valuation methods as appropriate. To the extent practical, models use only observable data; however areas

such as credit risk of the Bank and the counterparty, volatilities and correlations require management to

make estimates. Changes in assumptions about these factors could affect the estimated fair value of financial

instruments.

3. Impairment of available-for-sale financial assets

The determination of whether an available-for-sale financial asset is impaired requires significant judgement.

In making this judgement, the Group evaluates the duration and extent to which the fair value of an investment

of equity instrument is less than its cost; and the financial health of and near-term business outlook for the

investee, including factors such as industry and sector performance, credit ratings, delinquency rates and

counterparty risk.

4. Classification of held-to-maturity investments

The Group classifies non-derivative financial assets with fixed or determinable payments and fixed maturity

135

that the Group’s management has the positive intention and ability to hold to maturity as held-to-maturity

investments. This classification requires significant judgement. In making this judgement, the Group evaluates

its intention and ability to hold such investments to maturity. If the Group fails to hold these investments to

maturity other than for specific circumstances (such as selling an insignificant amount close to maturity), it

will be required to reclassify the entire portfolio of held-to-maturity investments as available-for-sale financial

assets.

5. Impairment of held-to-maturity investments and debt securities classified as receivables

The determination of whether a held-to-maturity financial asset or debt securities classified as receivables

is impaired requires significant judgement. Objective evidence that a financial asset or group of assets is

impaired includes a breach of contract, such as a default or delinquency in interest or principal payments, etc.

In making such judgement, the impact of objective evidence for impairment on expected future cash flows of

the investment is taken into account.

6. Taxes

There are certain transactions and activities for which the ultimate tax determination is uncertain during the

ordinary course of business. Where the final tax outcome of these matters is different from the amounts that

were initially estimated, such differences will impact the current income tax and deferred income tax in the

period during which such a determination is made.

VI. TAXATION

1. Enterprise income tax

According to the Corporate Income Tax Law of the People’s Republic of China, the income tax is calculated

and settled at the tax rate of 25%.

The deductible items of enterprise income tax are in accordance with the relevant regulations. Enterprise

income tax is prepaid by branches and conducted annual filing by the head office.

2. Business tax

Business tax is calculated according to 5% of taxable revenue. Branches declare and pay the business tax to

local tax bureau.

3. City maintenance and construction tax

City maintenance and construction tax is calculated according to 1% ~ 7% of business tax.

4. Education surcharge

Education surcharge is calculated according to 3% ~ 5% of business tax.

136

VII. SUBSIDIARIES AND CONSOLIDATION RANGEDetails of the Bank’s principal subsidiaries are set out as follows:

Name of entityDate of

establish-ment

Place of establish-

ment

Proportion of equity

interest (%)

Principleactivities

Authorised capital/Paid-in capital

Proportion of voting power on the board

of directors (%)

Industrrial Bank Financial Leasing Co., Ltd.(1)

2010 Tianjin 100.00 Financial LeasingRMB

5,000 million100.00

China Industrial International Trust Limited

2003 Fuzhou 73.00 TrustRMB

2,576 million73.00

Industrial Fund Management Co., Ltd.(2) 2013 Fuzhou 90.00 Fund management

RMB500 million

90.00

China Industrial Asset Management Limited (3) 2013 Shanghai 73.00

Assets management, equity investment,

industrial investment, investment management

and consulting

RMB100 million

73.00

Industrial Wealth Asset Management Co., Ltd.(3) 2013 Shanghai 90.00 Assets management

RMB200 million

90.00

Shanghai Yuansheng Investment Management Co., Ltd. (4)

2013 Shanghai 73.00

Assets management, industrial investment,

investment management and consulting (except

brokage)

RMB5 million

73.00

(1) On January 2013, the Bank capitalized RMB 1.5 billion at Industrial Bank Financial Leasing Co., Ltd, and

the authorized capital of Industrial Bank Financial Leasing Co., Ltd reached to RMB 5 billion after that.

(2) The Bank received the notice of “China Banking Regulatory Commission approved Industrial Bank Co.,

Ltd. initiated the establishment of the fund management company” (YJF [2013] NO.105) from the CBRC on 5

March 2013, and the notice of “Approval of the establishment of Industrial Fund Management Co., Ltd.” (ZJXK

[2013] NO.288) from the the China Securities Regulatory Commission on 27 March, 2013. Upon the notices

from the regulators, the Bank is officially to set up the Industrial Fund Management Co., Ltd. accordingly.

Industrial Fund Management Co., Ltd, whose authorised capital was RMB 500 million yuan (the Bank invested

RMB 450 million yuan), was co-sponsored with the China Shipping Group Investments Limited and the Bank,

and was registered on 27 April, 2013. As at 31 December, 2013, the Bank held 90% of its shares.

(3) The companies are the subsidiaries of the Bank’s controlled subsidiaries.

(4) The Company is the subsidiary of China Industrial Asset Management Limited.

137

VIII. NOTES TO THE FINANCIAL STATEMENTS

1. Cash and balances with central bank

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Cash 6,442 5,705 6,442 5,704

Statutory deposit reserves (1) 349,902 292,837 349,717 292,641

Surplus deposit reserves (2) 66,208 92,585 66,205 92,584

Other deposit reserves (3) 319 504 319 504

Total 422,871 391,631 422,683 391,433

(1)The Group places statutory deposit recerves mainly with the PBOC, including RMB deposit reserves and

foreign deposit reserves. These deposit reserves are not available for the Group’s daily operations and can’t

be transfered without the PBOC’s approval. General deposit generates from Organizations deposit, financial

budget deposit, individual deposit, enterprise deposit, net trust funds and other deposit. On 31 December

2013, the ratio of the Bank’s RMB deposit reserves is 18% (31 December 2012:18 %), the ratio of foreign

deposit reserves is 5% (31 December 2012:5%). According to related regulations from the PBOC, foreign

deposit reserves are non-interest bearing.

(2) Surplus deposit reserves are maintained with the PBOC mainly for the purpose of clearing, transferring, etc.

(3)The majority of other deposits are the fiscal deposits placed with the PBOC according to regulations,

including central budgetary revenues, Local Treasury deposits, etc. The fiscal deposits placed with the PBOC

of institutions in mainland China are non-interest bearing.

2. Due from banks and other financial institutions

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Banks in mainland China 58,182 160,604 57,661 160,595

Other financial institutions in mainland China 888 1,495 877 1,495

Banks outside mainland China 3,796 2,564 3,796 2,564

Subtotal 62,866 164,663 62,334 164,654

Less: Provisions for impairment (21) (21) (21) (21)

Net value 62,845 164,642 62,313 164,633

138

3. PLACEMENTS WITH BANKS AND OTHER FINANCIAL INSTITUTIONS

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Banks in mainland China 60,275 186,175 60,275 186,175

Other financial institutions in mainland China 26,884 28,454 26,970 28,454

Banks outside mainland China - 251 - 251

Subtotal 87,159 214,880 87,245 214,880

Less: Provisions for impairment (68) (68) (68) (68)

Net value 87,091 214,812 87,177 214,812

4. Held-for-trading financial assets

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Government bonds 177 1,255 177 1,255

The central bank bills and policy financial bonds 4,560 2,096 4,560 2,096

Corporate bonds 37,530 18,189 37,530 18,189

Equity instrument 24 - - -

Trust plan of assembled funds 4 - - -

Total 42,295 21,540 42,267 21,540

5. Derivative financial instruments

The Group enters into foreign currency exchange rate, interest rate and precious metals related derivative

financial instruments for purposes of trading, asset and liability management and customer driven business.

The notional amounts of derivative instruments represents the value of the underlying asset or the reference

rate, which provide a basis for measuring the change in fair value and an indication of the volume of business

transacted by the Group, but don’t stand for the relevant future cash flow or current fair value, thus, do

not indicate the Group’s exposure to credit or market risks. The derivative instruments become favourable

(assets) or unfavourable (liabilities) as a result of fluctuations in market interest rates, foreign exchange rates

or precious metal prices relative to their terms. The aggregate fair values of derivative financial assets and

liabilities can fluctuate significantly from time to time.

139

The notional amount and fair value of the Group’s derivative financial instruments:

UNIT: RMB Million

The Group and the Bank

12/31/2013 12/31/2012

Notional amount

Fair Value Notional amount

Fair Value

Assets Liabilities Assets Liabilities

Interest rate derivatives 372,459 4,142 3,989 346,583 1,385 1,255

Exchange rate derivatives 504,752 2,195 2,741 418,952 1,821 1,658

Precious metal derivatives 5,264 68 134 4,926 59 83

Credit derivatives 670 9 - 859 1 -

Total 6,414 6,864 3,266 2,996

6. Financial assets held under resale agreements

UNIT: RMB Million

The Group and the Bank

12/31/2013 12/31/2012

Bonds 12,846 23,265

Bills 352,626 370,452

Beneficial rights of trust and others (Note 1) 554,016 394,715

Credit assets 700 3,291

Lease receivables 902 1,074

Total 921,090 792,797

Note 1: Beneficial rights of trust and others mainly comprised of the investment to trust plans and asset management plans

operated by trust companies, securities companies and asset management companies.

140

7. Interest receivable

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Due from central bank and financial institutions 909 2,266 910 2,266

Placements with banks and other financial institutions 596 3,284 597 3,284

Financial assets held under resale agreements 10,169 5,761 10,169 5,761

Loans and advances to customers 4,048 3,428 4,048 3,427

Bonds and other investments 7,469 4,738 7,419 4,712

Others 58 58 3 32

Total 23,249 19,535 23,146 19,482

8. Loans and advances to customers

(1) Analysis of loans and advances to customers by personal and corporate:

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Personal loans and advances

Residential and business mortgage loans 185,061 172,943 185,061 172,943

Credit cards 60,375 40,354 60,375 40,354

Others 108,208 86,639 108,208 86,639

Subtotal 353,644 299,936 353,644 299,936

Corporate loans and advances

Loans and advances 988,808 912,187 988,808 912,038

Discounted bills 14,605 17,042 14,605 17,042

Subtotal 1,003,413 929,229 1,003,413 929,080

Gross loans and advances 1,357,057 1,229,165 1,357,057 1,229,016

Less: Provisions for impairment (36,375) (24,623) (36,375) (24,622)

-Individually assessed (3,139) (2,025) (3,139) (2,025)

-Collectively assessed (33,236) (22,598) (33,236) (22,597)

Loans and advances to customers 1,320,682 1,204,542 1,320,682 1,204,394

141

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1,32

0,68

21,

204,

394

Not

e 1:

Hea

d of

fice

cont

ains

the

cred

it ca

rd c

ente

r an

d th

e tr

easu

ry c

ente

r.

Not

e 2:

As

at 3

1 D

ecem

ber

2013

, the

Ban

k ha

s 39

tier

-1 b

ranc

hes.

Apa

rt fr

om th

e tie

r-1

bran

ches

men

tione

d ab

ove,

the

rest

all

cato

goris

es in

to “

Oth

ers”

.

143

(4) Analysis of loans and advances to customers by security type:

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Unsecured loans 255,792 231,063 255,792 231,063

Guaranteed loans 305,317 276,693 305,317 276,544

Collateralised loans 781,343 704,367 781,343 704,367

-Secured by mortgage 600,367 531,556 600,367 531,556

-Secured by collaterals 180,976 172,811 180,976 172,811

Discounted bills 14,605 17,042 14,605 17,042

Gross loans and advances 1,357,057 1,229,165 1,357,057 1,229,016

Less: Provisions for impairment (36,375) (24,623) (36,375) (24,622)

-Individually assessed (3,139) (2,025) (3,139) (2,025)

-Collectively assessed (33,236) (22,598) (33,236) (22,597)

Loans and advances to customers 1,320,682 1,204,542 1,320,682 1,204,394

144

The

Gro

up a

nd th

e B

ank

12/3

1/20

1312

/31/

2012

1-90

day

s(in

clud

ing

90 d

ays)

90-3

60

days

(incl

udin

g36

0 da

ys)

360

days

to3

year

s(in

clud

ing

3 ye

ars)

over

3

year

sTo

tal

1-90

day

s(in

clud

ing

90 d

ays)

90-3

60

days

(incl

udin

g 36

0 da

ys)

360

days

to3

year

s(in

clud

ing

3 ye

ars)

over

3 ye

ars

Tota

l

Uns

ecur

ed lo

ans

1,18

41,

013

201

132,

411

644

337

160

271,

168

Gua

rant

eed

loan

s2,

034

2,16

498

899

5,28

51,

348

859

597

325

3,12

9

Col

late

ralis

ed lo

ans

2,

779

3,03

571

410

66,

634

2,51

31,

204

680

411

4,80

8

-S

ecur

ed b

y m

ortg

age

2,60

22,

506

654

715,

833

2,35

21,

057

649

312

4,37

0

-S

ecur

ed b

y co

llate

rals

177

529

6035

801

161

147

3199

438

Tota

l5,

997

6,21

21,

903

218

14,3

304,

505

2,40

01,

437

763

9,10

5

(5)

Ove

rdue

loan

s

UN

IT:

RM

B M

illio

n

Not

e: T

he lo

an w

ill b

e ca

togo

rised

into

ove

rdue

if p

rinci

pal o

r in

tere

st is

ove

rdue

for

one

day.

145

(6) Provisions for loan impairment

UNIT: RMB Million

The Group

2013 2012

Individually Collectively Total Individually Collectively Total

Opening balance 2,025 22,597 24,622 1,868 12,446 14,314

Charge for the year 5,011 11,407 16,418 1,388 10,370 11,758

Write-offs (413) (484) (897) (924) (207) (1,131)

Transfer in/out (3,484) (242) (3,726) (307) (11) (318)

-Recoveries of loans

and advances written off in previous years 63 50 113 37 17 54

-Unwinding of discount on allowance (329) (58) (387) (161) (28) (189)

-Transfer out due to disposal (3,218) (234) (3,452) (183) - (183)

Fluctuation in exchange rate - (42) (42) - - -

Closing balance 3,139 33,236 36,375 2,025 22,598 24,623

UNIT: RMB Million

The Bank

2013 2012

Individually Collectively Total Individually Collectively Total

Opening balance 2,025 22,597 24,622 1,868 12,446 14,314

Charge for the year 5,011 11,407 16,418 1,388 10,369 11,757

Write-offs (413) (484) (897) (924) (207) (1,131)

Transfer in/out (3,484) (242) (3,726) (307) (11) (318)

-Recoveries of loans

and advances written off in previous years 63 50 113 37 17 54

-Unwinding of discount on allowance (329) (58) (387) (161) (28) (189)

-Transfer out due to disposal (3,218) (234) (3,452) (183) - (183)

Fluctuation in exchange rate - (42) (42) - - -

Closing balance 3,139 33,236 36,375 2,025 22,597 24,622

146

9. Available-for-sale financial assets

(1) Listed by types:

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Bond investment:

Government bonds 49,163 13,170 49,163 13,170

The central bank bills and policy financial bonds 50,061 50,913 50,061 50,913

Bonds issued by banks and other financial institutions 5,713 5,556 5,713 5,556

Corporate bonds 79,721 66,078 77,628 65,113

Subtotal 184,658 135,717 182,565 134,752

Trust fund plans and others (Note 1) 78,774 55,914 78,524 55,314

Equity instrument 256 434 15 18

Subtotal 263,688 192,065 261,104 190,084

Less: Provision for impairment (7) (8) - -

Total 263,681 192,057 261,104 190,084

Note 1: Trust fund plans and others are the beneficial rights of trust or asset management plans which are designated as

available-for-sale financial assets when initially invested by the Group. These products’ investment directions are mainly

the trust loans or fund management plans run by the trust companies, asset management companies or securities

companies as entrusted fund administrators. According to the liquidity management or operation management, these

beneficial rights of trust or fund management plans will be probably for sale.

147

(2) Related analysis for available-for-sale financial assets:

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Available-for-sale debt instrument:

Amortized cost 269,613 192,743 267,232 191,185

Fair value 263,432 191,631 261,089 190,066

Accumulative appropriation to other

comprehensive income (6,181) (1,112) (6,143) (1,119)

Accumulative appropriation to provisions - - - -

Available-for-sale equity instrument:

Cost 219 420 4 10

Fair value 249 426 15 18

Accumulative appropriation to other

comprehensive income 37 14 11 8

Accumulative appropriation to provisions (7) (8) - -

Total:

Cost 269,832 193,163 267,236 191,195

Fair value 263,681 192,057 261,104 190,084

Accumulative appropriation to other

comprehensive income (6,144) (1,098) (6,132) (1,111)

Accumulative appropriation to provisions (7) (8) - -

(3) Related analysis about provisions for impairment on available-for-sale financial assets

UNIT: RMB Million

The Group The Bank

Available-for-sale

debt instrument

Available-for-sale

equity instrument

Total

Available-for-sale

debt instrument

Available-for-sale

equity instrument

Total

Opening - 8 8 - - -

Charge for the year - - - - - -

Including: transfer in from other

comprehensive income - - - - - -

Credit for the year - (1) (1) - - -

Including: recovery due to the

rising of fair value - - - - - -

Closing - 7 7 - - -

148

10. Held-to-maturity investments

UNIT: RMB Million

The Group and the Bank

12/31/2013 12/31/2012

Government bonds 89,101 46,863

The central bank bills and policy financial bonds 1,396 2,276

Bonds issued by banks and other financial institutions 2,116 19

Corporate bonds 24,123 20,167

Deposit receipt from banks (Note 1) 1,041 -

Subtotal 117,777 69,325

Less: Provisions (122) (126)

Net value 117,655 69,199

Note 1: The deposit receipt from banks refers to accouting deposit certificate issued on national inter-bank market by banks

which have licesence of deposit invested by the Group.

11. Debt securities classified as receivables

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Government bonds 528 819 528 819

Bonds issued by banks

and other financial institutions 8,719 7,770 8,719 7,770

Corporate bonds 17,747 17,732 17,747 17,732

Wealth management products (Note 1) 5,936 4,450 5,936 4,450

Trust fund plans and others (Note 2) 297,070 80,740 295,405 79,558

Subtotal 330,000 111,511 328,335 110,329

Less: Provisions (1,372) (151) (1,372) (151)

Net value 328,628 111,360 326,963 110,178

Note 1: Wealth management products are fixed-period financial products issued by other financial institutions.

Note 2: Trust fund plans and others are the beneficial rights of the trust or fund management plans, etc. These products’

investment directions are mainly the trust loans or fund management plans operated by the trust companies, securities

companies and asset management companies as entrusted fund administrators.

149

12. Finance lease receivables

Analysis by nature:

UNIT: RMB Million

The Group

12/31/2013 12/31/2012

Financel lease receivables 55,440 40,391

Less: unrealized financing income (8,119) (5,901)

Subtotal 47,321 34,490

Less: Provision for finance lease (1,227) (711)

-Collectively assessed (1,227) (711)

Net value 46,094 33,779

List as follows:

UNIT: RMB Million

The Group

12/31/2013 12/31/2012

1st year subsequant to the balance sheet date 14,109 10,641

2nd year subsequant to the balance sheet date 13,140 10,099

3rd year subsequant to the balance sheet date 11,298 8,519

Subsequant periods 16,893 11,132

Subtotal 55,440 40,391

Unrealized financing income (8,119) (5,901)

Subtotal 47,321 34,490

Less: Provision for finance lease (1,227) (711)

-Collectively assessed (1,227) (711)

Net value 46,094 33,779

-Finance lease receivables due less than 1 year 11,731 8,160

-Finance lease receivables due more than 1 year 34,363 25,619

150

13. L

ong-

term

equ

ity in

vest

men

ts

Bre

akd

ow

n o

f lo

ng

-te

rm e

qu

ity in

vest

me

nts

:

UN

IT:

RM

B M

illio

n

The

Gro

up

Acc

ount

ing

met

hod

Initi

al

inve

stm

ent

01/0

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dditi

ons

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Pro

port

ion of

equ

ity

inte

rest

(%)

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port

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g

pow

er

in th

e

inve

stee (%

)

Exp

lain

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n on

inco

nsis

tenc

y

betw

een

the

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port

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of e

quity

inte

rest

and

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prop

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n of

votin

g po

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stee

Pro

visi

ons

Cas

h

divi

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Ban

k of

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jiang

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. (1)

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151

(1) In accordance with the YJF [2008] No.449, approved by the CBRC on 4 November, 2008, the Bank has

acquired 102.2 million shares of Bank of Jiujiang Co., Ltd. (refers to as Bank of Jiujiang hereafter) for the price

of RMB 2.9 yuan per share. As the result, the Bank holds 20% of the total shares of the Bank of Jiujiang after

it expanded its share capital. In 2009, Bank of Jiujiang increases 4 shares for every 10 shares to all recorded

shareholders based on the share capital by the end of August 2009 by utilizing capital reserve. The Bank held

143.08 million shares of Bank of Jiujiang. In 2010, Bank of Jiujiang increases its registered capital RMB400.66

million, offered privately and subscribed in cash for the price of RMB 3.3 yuan per share. The Bank has

acquired 80.12 million shares. After the acquisition, the Bank holds 223.20 million shares and the proportion

of equity interest remains 20% of the total shares of the Bank of Jiujiang after it expanded its share capital.

On 14 December 2011, Bank of Jiujiang increased its registered capital by RMB 400 million, the Bank didn’t

subscribe, and the proportion of equity interest of the Bank was diluted to 14.72% after the increase of share

capital. The equity invesment is accounted for using the equity method since the Bank sent a director to the

Bank of Jiujiang and has significant influnce over the Bank of Jiujiang.

(2) Huafu Securities Co., Ltd., Zijin Mining Group Finance Limited, Chongqing Machinery and Electronics

Holding Group Finance Company Limited are the investees of China Industrial International Trust Limited’s

long-term investments.

(3) As China Industrial International Trust Limited holds 19% of the total shares and sends directors to the

investee, China Industrial International Trust Limited has significant influnce over Chongqing Machinery and

Electronics Holding Group Finance Company Limited, therefore the equity invesment is accounted by the

equity method.

(4) There are no restrictions of the investees’ capital transferring capacities to the Group and the Bank on 31

December 2013.

152

14. Fixed Asset

UNIT: RMB Million

The Group

BuildingsProperty

improvementEquipment

Transportation vehicles

Total

Cost

1/1/2013 5,954 385 3,645 336 10,320

Purchase 45 4 882 89 1,020

Transfers from

constructions in progress 492 47 23 - 562

Sales/disposals (57) (7) (196) (26) (286)

12/31/2013 6,434 429 4,354 399 11,616

Accumulated depreciation

1/1/2013 1,322 202 2,021 116 3,661

Depreciation for the year 171 50 569 45 835

Eliminated on sales/disposals (3) (4) (135) (17) (159)

12/31/2013 1,490 248 2,455 144 4,337

Net value

1/1/2013 4,632 183 1,624 220 6,659

12/31/2013 4,944 181 1,899 255 7,279

Provision for impairment

1/1/2013 (3) - - - (3)

Recognised in profit or loss - - - - -

Eliminated on sales/disposals - - - - -

12/31/2013 (3) - - - (3)

Net carrying amount

1/1/2013 4,629 183 1,624 220 6,656

12/31/2013 4,941 181 1,899 255 7,276

All the buildings of the Group are located in the PRC. Buildings cost RMB 1,014 million are in use but the legal

ownership registrations were still in process as at 31 December, 2013 (31 December 2012: RMB 825 million).

153

UNIT: RMB Million

The Bank

Buildings Property

improvementEquipment

Transportation vehicles

Total

Cost

1/1/2013 5,938 385 3,633 324 10,280

Purchase 45 4 870 85 1,004

Transfers from

constructions in progress 492 47 23 - 562

Sales/disposals (57) (7) (195) (26) (285)

12/31/2013 6,418 429 4,331 383 11,561

Accumulated depreciation

1/1/2013 1,320 202 2,016 115 3,653

Depreciation for the year 170 50 566 43 829

Eliminated on sales/disposals (2) (4) (135) (17) (158)

12/31/2013 1,488 248 2,447 141 4,324

Net value

1/1/2013 4,618 183 1,617 209 6,627

12/31/2013 4,930 181 1,884 242 7,237

Provision for impairment

1/1/2013 (3) - - - (3)

Recognised in profit or loss - - - - -

Eliminated on sales/disposals - - - - -

12/31/2013 (3) - - - (3)

Net carrying amount

1/1/2013 4,615 183 1,617 209 6,624

12/31/2013 4,927 181 1,884 242 7,234

All the buildings of the Group are located in the PRC. Buildings cost RMB 1,014 million are in use but the legal

ownership registrations were still in process as at 31 December, 2013(31 December 2012: RMB 825 million).

154

15. Construction in progress

(1) Details of construction in progress are as follows:

UNIT: RMB Million

The Group

12/31/2013 12/31/2012

Carrying amount

Provision for

impairment loss

Net carryingamount

Carrying amount

Provision for

impairment loss

Net carryingamount

CIB building, Beijing 1,271 - 1,271 1,108 - 1,108

Operating building, Lujiazui Shanghai 804 - 804 804 - 804

Operating building, Dalian 321 - 321 - - -

Operating building, Wuxi 300 - 300 144 - 144

Operating building, Suzhou 148 - 148 - - -

Operating building, Nantong 144 - 144 - - -

Others 493 - 493 675 - 675

Total 3,481 - 3,481 2,731 - 2,731

UNIT: RMB Million

The Bank

12/31/2013 12/31/2012

Carrying amount

Provision for

impairment loss

Net carryingamount

Carrying amount

Provision for

impairment loss

Net carryingamount

CIB building, Beijing 1,271 - 1,271 1,108 - 1,108

Operating building, Lujiazui Shanghai 804 - 804 804 - 804

Operating building, Dalian 321 - 321 - - -

Operating building, Wuxi 300 - 300 144 - 144

Operating building, Suzhou 148 - 148 - - -

Operating building, Nantong 144 - 144 - - -

Others 488 - 488 675 - 675

Total 3,476 - 3,476 2,731 - 2,731

155

(2) Changes in significant construction in progress:

UNIT: RMB Million

The Group

2013

1/1/2013 AdditionsTransfer to

fixed assets

Transfer to long-term

prepaid expenses

12/31/2013

CIB building, Beijing 1,108 163 - - 1,271

Operating building,

Lujiazui Shanghai 804 - - - 804

Operating building, Dalian - 321 - - 321

Operating building, Wuxi 144 156 - - 300

Operating building, Suzhou - 148 - - 148

Operating building, Nantong - 144 - - 144

Others 675 806 (562) (426) 493

Total 2,731 1,738 (562) (426) 3,481

UNIT: RMB Million

The Bank

2013

1/1/2013 AdditionsTransfer to

fixed assets

Transfer to long-term

prepaid expenses

12/31/2013

CIB building, Beijing 1,108 163 - - 1,271

Operating building,

Lujiazui Shanghai 804 - - - 804

Operating building, Dalian - 321 - - 321

Operating building, Wuxi 144 156 - - 300

Operating building, Suzhou - 148 - - 148

Operating building, Nantong - 144 - - 144

Others 675 801 (562) (426) 488

Total 2,731 1,733 (562) (426) 3,476

156

16. Goodwill

UNIT: RMB Million

The Group

Investee 1/1/2013 Additions Less 12/31/201312/31/2013

Provision

China Industrial International Trust Limited

446 - - 446 -

Goodwill arose from acquisition of China Industrial International Trust Limited in February 2011.

At the end of the year, the Group performed impairment tests on goodwill based on future cash flow of the

investee for next 5 years, applying appropriate discount rate, reflecting current time value of money and the

risk of specific assets. No evidence shows that the recoverable amount of goodwill is less than the carrying

amount, therefore no impairment is recognised.

157

The

Gro

upT

he B

ank

12/3

1/20

1312

/31/

2012

12/3

1/20

1312

/31/

2012

Ded

uctib

le

(tax

able

)te

mpo

rary

diffe

renc

es

Def

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d ta

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(li

abili

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(tax

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Def

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d ta

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(li

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Def

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(li

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diffe

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Def

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d ta

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(li

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sets

Impa

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ses

on a

sset

s25

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6,27

312

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3,09

524

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6,07

911

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2,99

4

Fai

r va

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chan

ges

of

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finan

cial

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450

113

--

450

113

--

Fai

r va

lue

chan

ges

of h

eld-

for-

tra

ding

fina

ncia

l ins

trum

ents

672

167

8921

672

167

8921

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r va

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of

ava

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144

1,53

61,

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127

8

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7,67

51,

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5,91

61,

479

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31,

838

5,75

31,

438

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of

pre

ciou

s m

etal

s1

-16

441

1-

164

41

Oth

ers

397

9936

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158

UNIT: RMB Million

The Group The Bank

2013 2013

Opening balance of net value 4,936 4,796

-Deferred tax assets 5,003 4,863

-Deferred tax liabilities (67) (67)

Net changes of deferred tax recognised in

income tax expenses 3,910 3,779

Net changes of deferred tax recognised in

other comprehensive income 1,261 1,255

Closing balance of net value 10,107 9,830

-Deferred tax assets 10,107 9,830

-Deferred tax liabilities - -

(2) According to the Group’s future profit forecast, the Group believes that it is probable that sufficient taxable

profits will be available in future periods to offset the deductible temporary differences and deductible losses.

Therefore, the Group can recognize the deferred tax assets.

18. Other assets

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Other receivables(1) 3,566 2,611 3,229 2,460

Prepaid purchase cost of finance lease assets 5,553 5,396 - -

Foreclosed assets(2) 136 479 136 479

Items in the process of clearance and settlement 410 644 410 644

Long term deferred assets (3) 1,377 1,196 1,371 1,188

Total 11,042 10,326 5,146 4,771

159

(1) Other receivables

Listed by account age:

UNIT: RMB Million

Account age

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

AmountProportion

(%)Amount

Proportion (%)

AmountProportion

(%)Amount

Proportion (%)

Within 1 year 3,374 89.38 2,406 88.04 3,045 88.57 2,280 88.30

1-2years 213 5.64 201 7.35 205 5.96 176 6.82

2-3years 99 2.62 34 1.24 99 2.88 34 1.32

Over 3 years 89 2.36 92 3.37 89 2.59 92 3.56

Subtotal 3,775 100.00 2,733 100.00 3,438 100.00 2,582 100.00

Less: Provision for

bad debts (209) (122) (209) (122)

Net value 3,566 2,611 3,229 2,460

(2) Foreclosed assets

Analyzed by nature of the foreclosed assets:

UNIT: RMB Million

The Group and the Bank

12/31/2013 12/31/2012

Buildings 199 616

Land use rights 31 31

Others 1 1

Subtotal 231 648

Less: Provision for losses (95) (169)

Net value 136 479

160

(2) Long term deferred assets

UNIT: RMB Million

The Group

1/1/2013 AdditionsTransferred from

construction in progressAmortization 12/31/2013

Leasehold

improvements 1,110 190 417 (416) 1,301

Others 86 15 9 (34) 76

Total 1,196 205 426 (450) 1,377

UNIT: RMB Million

The Bank

1/1/2013 AdditionsTransferred from

construction in progressAmortization 12/31/2013

Leasehold

improvements 1,102 189 417 (413) 1,295

Others 86 15 9 (34) 76

Total 1,188 204 426 (447) 1,371

161

19. Provision for impairment losses of assets

UNIT: RMB Million

The Group

2013

1/1/2013Charge/(credit)

Transfer in/(out)

Write-off

Exchange

rate influence

12/31/2013

Loss provision for due from banks and other financial institutions

21 - - - - 21

Loss provision for placement with banks and other financial institutions

68 - - - - 68

Loss provision for loans and advances to customers 24,623 16,417 (3,726) (897) (42) 36,375

Loss provision for held-to-maturity investments 126 - - - (4) 122

Loss provision for available-for-sale financial assets 8 - (1) - - 7

Loss provision for debt securities classified as receivables 151 1,221 - - - 1,372

Loss provision for finance lease receivables 711 516 - - 1,227

Loss provision for fixed assets 3 - - - - 3

Loss provision for foreclosed assets 169 (74) - - - 95

Loss provision for prepaid purchase cost of finance lease assets

88 (18) - - - 70

Loss provision for other assets 122 126 - (39) - 209

Total 26,090 18,188 (3,727) (936) (46) 39,569

UNIT: RMB Million

The Bank

2013

1/1/2013Charge/(credit)

Transfer in/(out)

Write-off

Exchange rate

influence 12/31/2013

Loss provision for due from

banks and other financial institutions 21 - - - - 21

Loss provision for placement with banks

and other financial institutions 68 - - - - 68

Loss provision for loans and advances to customers 24,622 16,418 (3,726) (897) (42) 36,375

Loss provision for held-to-maturity investments 126 - - - (4) 122

Loss provision for debt securities classified as receivables 151 1,221 - - - 1,372

Loss provision for fixed assets 3 - - - - 3

Loss provision for foreclosed assets 169 (74) - - - 95

Loss provision for other assets 122 126 - (39) - 209

Total 25,282 17,691 (3,726) (936) (46) 38,265

162

20. Due to banks and other financial institutions

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Due to banks:

Domestic banks 590,130 670,470 590,130 670,470

Foreign banks 7,453 - 7,453 -

Due to other financial institutions:

Domestic other financial institutions 409,961 223,966 411,837 225,020

Total 1,007,544 894,436 1,009,420 895,490

21. Placements from banks and other financial institutions

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Domestic banks 64,324 83,964 26,679 53,254

Domestic other financial institutions - 400 - 400

Overseas banks 13,948 4,025 13,948 4,025

Total 78,272 88,389 40,627 57,679

22. Held-for-trading financial liabilities

UNIT: RMB Million

The Group and the Bank

12/31/2013 12/31/2012

Sale of rented precious metal 1,216 -

163

23. Financial assets sold under repurchase agreements

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Bonds 53,170 102,488 53,170 102,488

Bills 18,729 47,398 18,729 47,398

Others 9,882 11,976 6,757 11,976

Total 81,781 161,862 78,656 161,862

24. Due to customers

UNIT: RMB Million

The Group and the Bank

12/31/2013 12/31/2012

Demand deposits

Corporate 721,121 599,305

Personal 185,957 148,994

Subtotal 907,078 748,299

Term deposits (including call deposits)

Corporate 811,637 670,317

Personal 167,406 150,151

Subtotal 979,043 820,468

Guaranteed and margin deposits 280,853 241,265

Others 3,371 3,234

Total 2,170,345 1,813,266

164

Analysed by business/products for which guaranteed and margin deposits are required:

UNIT: RMB Million

The Group and the Bank

12/31/2013 12/31/2012

Bank acceptances 147,311 126,002

Reimbursement refinance - 4,946

Letters of credit 24,342 24,722

Guarantee 6,618 2,868

Others 102,582 82,727

Total 280,853 241,265

25. Employee benefits payable

UNIT: RMB Million

The Group The Bank

1/1/2013

Increase Decrease12/31/2013

1/1/2013 Increase Decrease12/31/2013

Salaries and bonus 6,833 13,095 (11,518) 8,410 6,652 12,714 (11,291) 8,075

Labour union expenditure

and staff educational funds 502 544 (349) 697 498 532 (341) 689

Social insurance 100 2,869 (2,881) 88 93 2,812 (2,822) 83

Supplmentary pension funds - 796 (778) 18 - 784 (769) 15

Total 7,435 17,304 (15,526) 9,213 7,243 16,842 (15,223) 8,862

The salaries, bonus, retirement benefits and other social insurance of employee benefits payable are granted

or paid according to time limit set by relevant laws, regulations and the Group’s policies.

26. Tax payable

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Income tax 9,675 7,450 9,384 7,266

Business tax 1,999 1,704 1,956 1,661

City maintenance and construction tax 139 116 135 113

Others 290 286 278 269

Total 12,103 9,556 11,753 9,309

165

27. Interest payable

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Interest due to banks and other

financial institutions 4,989 3,649 4,990 3,649

Interest of placement from banks and

other financial institutions 339 396 136 130

Interest of debt securities issued 624 697 624 697

Interest of financial assets sold under

repurchase agreements 301 487 285 487

Interest due to customers 20,058 13,653 20,058 13,653

Others 6 13 5 13

Total 26,317 18,895 26,098 18,629

28. Debt securities issued

UNIT: RMB Million

The Group and the Bank

12/31/2013 12/31/2012

Long term subordinated bonds 22,948 22,944

Financial bonds 37,960 42,025

Hybrid capital bonds 4,000 4,000

Deposit receipt from banks 2,993 -

Total 67,901 68,969

Debt securities issued by the Group include long-term subordinated bonds, financial bonds, hybrid capital

bonds and deposit receipt from banks. The hybrid capital bonds are issued to meet the requirement of hybrid

capital instrument (debt, equity) according to The Basel Capital Accord, whose liquidation sequence is behind

subordinated debts. The deposit receipt from banks refers to accouting deposit receipt issued on national

inter-bank market by the Bank.

166

Detailed information for debt securities issued as follows:

UNIT: RMB Million

Type Issuing dateInterest payable

fruequency12/31/2013

Long-term subordinate bonds

09 CIB 01(1) 2009-09-09 Yearly 2,005

09 CIB 02(2) 2009-09-09 Yearly 7,995

10 CIB 01(3) 2010-03-29 Yearly 3,000

11 CIB 01(4) 2011-06-28 Yearly 10,000

Less: unamortized issuance cost (52)

Subtotal 22,948

Financial bonds

06 CIB 03(5) 2006-12-15 Yearly 8,000

11 CIB 01 (6) 2011-12-28 Yearly 30,000

Less: unamortized issuance cost (40)

Subtotal 37, 960

Hybrid capital bonds

06 CIB 02 fixed (7) 2006-09-28 Yearly 3,000

06 CIB 02 floating (8) 2006-09-28 Yearly 1,000

Less: unamortized issuance cost -

Subtotal 4,000

Deposit receipt from banks

13 CIB CD001 (9) 2013-12-13 Expiration 3,000

Less: unamortized issuance cost (7)

Subtotal 2,993

Total 67,901

167

(1) In September 2009, the Group issued RMB 2,005 million subordinated bonds with a 10-year maturity, a

fixed interest rate and a redemption option in the end of the fifth year. The annual coupon rate in first five

interet-bearing years is 4.30%, and the rate in late five years is 7.30% if the issuer does not exercise the

option of redemption.

(2) In September 2009, the Group issued RMB 7,995 million subordinated bond with a 15-year maturity, a fixed

interest rate and a redemption option in the end of the tenth year. The annual coupon rate in first ten interet-

bearing years is 5.17%, and the rate in late five years is 8.17% if the issuer does not exercise the option of

redemption.

(3) In March 2010, the Group issued RMB 3,000 million subordinated bond with a 15-year maturity, a fixed

interest rate and a redemption right in the end of the tenth year. The annual coupon rate in first ten interet-

bearing years is 4.80%, and the rate in late five years is 7.80% if the issuer does not exercise the option of

redemption.

(4) In June 2011, the Group issued RMB 10,000 million subordinated bond with a 15-year maturity, a fixed

interest rate and a redemption right in the end of the tenth year. The annual coupon rate is 5.75% consistently.

(5) In December 2006, the Group issued RMB 8,000 million financial bond with a 10-year maturity and a fixed

interest rate. The annual coupon rate is 3.75%.

(6) In December 2011, the Group issued RMB 30,000 million special financial bond for small enterprises with a

5-year maturity and a fixed interest rate. The annual coupon rate is 4.20%.

(7) In September 2006, the Group issued RMB 3,000 million hybrid capital bond with a 15-year maturity and a

fixed interest rate. The Bank has an option to redeem all of the bonds at face value from the eleventh year to

maturity day. The annual coupon rate of the first ten years is 4.94%. If the Bank does not exercise this option,

the annual coupon rate of the bonds will be 7.74% for the next five years.

(8) In September 2006, the Group issued RMB 1,000 million hybrid capital bond with a 15-year maturity and a

floating interest rate. The Bank has an option to redeem all of the bonds at face value from the eleventh year

to maturity day. Annual interest rate is the summation of the benchmark interest rate and the basic margin; the

benchmark interest rate refers to the interest rate for fixed amount and period deposit with a term of one year

stipulated by the PBOC, which is applicable on the issuance date and repricing date. The basic margin of the

first ten years (the original basic margin) is 1.82%. If the Bank does not exercise this option, the basic margin

will be the original basic margin plus 1% during the period from the 11th year to the maturity of the bond.

(9) In December 2013, the Group issued RMB 30,000 deposit receipt from banks with a 1-month maturity and

a fixed interest rate. The annual coupon rate is 5.16%.

168

29. Other liabilites

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Bank promissory notes 412 151 412 151

Items in the process of clearance and settlement 639 863 639 863

Dividend payables 6 5 6 5

Wealth management and entrusted investment fund 2,889 3,881 2,889 3,881

Deferred income 2,693 2,058 1,718 1,187

Other payables 8,069 7,578 3,551 3,798

Total 14,708 14,536 9,215 9,885

30. Share capital

UNIT: RMB Million

The Group and the Bank

Change for the year

1/1/2013 Capitalisation of stock dividend 12/31/2013

Shares without limited sales restrictions

RMB ordinary shares (A shares) 10,786 5,392 16,178

Shares with limited sales restrictions

RMB ordinary shares (A shares) 1,916 958 2,874

Total shares 12,702 6,350 19,052

According to the 2012 Profit Distribution Proposal of the Bank, the Bank distributed 5 ordinary shares (tax

inclusive) every 10 shares on the basis of 12,701,557,834 ordinary shares. As at 31 December 2013, the

distribution has been completed. The net registered capital has been increased to RMB 19,052,336,751, which

was verified by Deloitte Touche Tohmatsu CPA LLP who issued the capital verification report De Shi Bao (Yan)

Zi (13) No. 0159 on 12 July 2013.

As at 31 December 2013, the share capital of the Bank is RMB 19, 052 million (31 December 2012: 12,702

million) with par value of RMB 1 Yuan per share.

169

31. Capital reserve

UNIT: RMB Million

The Group The Bank

1/1/2013

IncreaseDe-

crease 12/31/2013

1/1/2013

IncreaseDe-

crease12/31/2013

Equity premium 50,828 - - 50,828 51,048 - - 51,048

Changes in fair value of

available-for-sale financial assets (836) - (3,779) (4,615) (833) - (3,766) (4,599)

Others 29 - - 29 29 - - 29

Total 50,021 - (3,779) 46,242 50,244 - (3,766) 46,478

32. Surplus reserve

UNIT: RMB Million

The Group and the Bank

12/31/2013 12/31/2012

Statutory surplus reserve 9,527 6,351

Discrentionary surplus reserve 297 297

Total 9,824 6,648

Pursuant to the relating laws issued by the government, the Bank is required to transfer 10% of its net profit to

the statutory surplus reserve. The statutory surplus reserve is no longer appropriated when the accumulated

amount exceeds 50% of the Bank’s registered capital. As of 31 December, 2013, the Bank appropriated the

amout which was equal to the difference between 50% of the balance of the registered capital and the balance

of the accumulated statutory surplus reserves appropriated at the end of last year to the statutory suplus

reserve.

170

33. General and regulatory reserve

UNIT: RMB Million

The Group and the Bank

12/31/2013 12/31/2012

General and regulatory reserve 31,325 28,923

Pursuant to (CJ[2012] No. 20)Measures on General Provision for Bad and Doubtful Debts for Financial

Institutions promulgated by the MOF, the Bank is required to transfer certain percentage of its net profit to

establish and maintain a general reserve within shareholders’ equity, through the appropriation of profit to

address unidentified potential impairment losses. In principle, the general and regulatory reserve balance

should not be lower than 1.5% of the ending balance of gross risk-bearing assets. Gross risk-bearing assets,

inclue loans and advances to customers, available-for-sale financial assets, held-to-maturity investments,

long-term equity investments, due from banks and other financial institutions, placements with banks and

other financial institutions, foreclosed assets and other receivables and so forth. As at 31 December, 2013, the

balance of the provision of general risk is 1.5% of the balance of risk-bearing assets at the end of the year.

34. Retained earnings

UNIT: RMB Million

The Group The Bank

2013 2012 2013 2012

Opening balance 71,283 56,427 69,648 56,022

Net profit for the year 41,211 34,718 39,519 33,488

Appropriations to statutory surplus reserve (3,176) (735) (3,176) (735)

Appropriations to general and regulatory reserve (2,402) (15,136) (2,402) (15,136)

Dividend distributions (13,590) (3,991) (13,590) (3,991)

Closing balance 93,326 71,283 89,999 69,648

171

(1) “2013 Profit Distribution Proposal of Industrial Bank” was approved by the Board of Directors on 28 March

2014:

(i) Transfer RMB 3,176 million to statutory surplus reserve based on the net profit RMB 39,519 million. As at

31 December 2013, the statutory surplus reserve recommended to transfer has been included in the surplus

reserve.

(ii) Transfer RMB 2,402 million to general and regulatory reserve. As at 31 December 2013, the general and

regulatory reserve recommended to transfer has been included in the general and regulatory reserve.

(iii) Distribute a cash dividend of RMB 0.46 per ordinary share (tax inclusive) on the basis of 19,052,336,751

ordinary shares at the end of 2013.

The profit distribution plan above has not been approved by the Annual General Meeting of the Bank. The

accounting treatment of dividend distribution scheme is not carried out.

(2) “2012 Profit Distribution Proposal of Industrial Bank” was approved on 21 May 2013 on the Annual General

Meeting of the Bank ,the detailed plan are as follows:

(i) Transfer RMB 735 million to statutory surplus reserve based on the net profit RMB 33,488 million. As at

31 December 2012, the statutory surplus reserve recommended to transfer has been included in the surplus

reserve.

(ii) Transfer RMB 15,136 million to general and regulatory reserve. As at 31 December 2012, the general and

regulatory reserve recommended to transfer has been included in the general and regulatory reserve.

(iii) Distribute 5 ordinary shares ( tax inclusive) every 10 shares and a cash dividend of RMB 0.57 per ordinary

share (tax inclusive) on the basis of 12,701,557,834 ordinary shares in the end of 2012.

As at December 31, 2013, the above-mentioned dividend distribution scheme has been done.

(3) Surplus reserves and risk reserves appropriated by subsidiaries

As at 31 December 2013, the balance of the Group’s retained earnings contained surplus reserves

appropriated by subsidiaries: RMB 360 million (31 December 2012: RMB 192million) and statutory reserves

(including general and regulatory reserve, trust compensation reserve, etc.) appropriated by subsidiaries: RMB

957 million (31 December 2012: RMB 700 million).

172

35. Net interest income

UNIT: RMB Million

The Group The Bank

2013 2012 2013 2012

Interest income

Balances with central bank 5,831 4,532 5,828 4,532

Due from banks and other

financial instituions 6,086 5,369 6,057 5,360

Placements with banks and other

financial institutions 6,998 12,865 7,008 12,865

Financial assets held under resale

agreements 50,231 40,836 50,230 40,836

Loans and advances to customers 82,505 74,727 82,497 74,707

Including: Corporate 60,561 54,356 60,553 54,336

Personal 20,377 17,549 20,377 17,549

Bill discount 1,567 2,822 1,567 2,822

Bonds and other investment 34,694 14,888 34,458 14,689

Finance lease 3,228 2,522 - -

Others 29 16 29 16

Subtotal 189,602 155,755 186,107 153,005

Interest expense

Due to banks and other

financial institutions (47,367) (35,997) (47,411) (36,036)

Placement from banks and

other financial intitutions (2,718) (2,066) (883) (734)

Financial assets sold under

repurchase agreements (5,537) (7,801) (5,521) (7,782)

Due to customers (44,209) (33,662) (44,209) (33,662)

Debt securities issued (3,100) (3,283) (3,100) (3,283)

Others (826) (753) (826) (753)

Subtotal (103,757) (83,562) (101,950) (82,250)

Net interest income 85,845 72,193 84,157 70,755

Including: Interest income accrued

on impaired financial assets 387 189 387 189

173

36. Net fee and commission income

UNIT: RMB Million

The Group The Bank

2013 2012 2013 2012

Fee and commission income

Settlement and clearing fee 517 474 517 474

Bank card fee 4,742 2,497 4,742 2,497

Agency commissions 2,724 1,832 2,724 1,832

Guarantee and commitment

commissions 1,111 1,343 1,111 1,343

Transactional service fee 105 127 105 127

Custodian fee 3,357 1,494 3,357 1,494

Consultancy and advisory fee 9,642 6,046 9,540 5,988

Trust service fee 1,630 1,090 - -

Lease service fee 384 264 - -

Others 524 514 524 514

Subtotal 24,736 15,681 22,620 14,269

Fee and commission expense

Settlement and clearing expenses (81) (64) (81) (64)

Bank card expenses (421) (162) (421) (162)

Inter-bank expenses (100) (175) (100) (175)

Others (372) (333) (374) (324)

Subtotal (974) (734) (976) (725)

Net fee and commision income 23,762 14,947 21,644 13,544

174

37. Investment income (loss)

UNIT: RMB Million

The Group The Bank

2013 2012 2013 2012

Precious metal 837 56 837 56

Held-for-trading financial assets (232) (19) (237) (19)

Derivative financial instruments (1,069) (785) (1,069) (785)

Available-for-sale financial assets 196 162 75 78

Long-term equity investment

(equity method) 248 221 240 221

Dividend declared by investee

(cost method) 18 18 3 3

Held-for-trading financial liabilites 24 1 24 1

Total 22 (346) (127) (445)

38. Gains (losses) from changes in fair value

UNIT: RMB Million

The Group and the Bank

2013 2012

Net gains (losses) on precious metals 163 (32)

Net gains (losses) on held-for-trading financial assets (595) (22)

Net gains (losses) on derivative financial instruments (722) 393

Net gains (losses) on held-for-trading financial liabilites 12 -

Total (1,142) 339

39. Business tax and levies

UNIT: RMB Million

The Group The Bank

2013 2012 2013 2012

Business tax 6,937 5,103 6,756 4,960

City maintenance and

construction tax 488 356 471 346

Education surcharge 327 241 315 233

Others 79 48 78 47

Total 7,831 5,748 7,620 5,586

175

40. General and administrative expenses

UNIT: RMB Million

The Group The Bank

2013 2012 2013 2012

Staff costs 17,304 13,404 16,842 13,096

Depreciation and amortization 1,404 1,230 1,392 1,223

Lease expenses 1,885 1,469 1,847 1,442

Others 8,164 6,774 7,964 6,644

Total 28,757 22,877 28,045 22,405

41. Impairment losses of assets

UNIT: RMB Million

The Group The Bank

2013 2012 2013 2012

Loans and advances to customers 16,417 11,758 16,418 11,757

Debt securities classified

as receivables 1,221 76 1,221 76

Available-for-sale financial assets - 8 - -

Finance lease receivables 516 400 - -

Others 34 140 52 136

Total 18,188 12,382 17,691 11,969

176

42. Non-operating income

UNIT: RMB Million

The Group The Bank

2013 2012 2013 2012

Gains from disposal of non-current assets 6 1 6 1

Including: Gains from disposal of fixed assets 3 1 3 1

Gains from disposal of foreclosed assets 3 - 3 -

Penalties and fines received 4 1 4 1

Gains from dormant accounts 8 6 8 6

Government grants 162 119 45 89

Others 133 60 133 59

Total 313 187 196 156

The credit card center of the Bank received Newly Established Financial Institution supporting fund of RMB 45

million from Shanghai Municipal People’s Government under “The regulations of focalizing financial resources,

strengthing financial services, and facilitating the development of financial industry in Shanghai” (HFF [2009]

No.40) ; Industrial Bank Financial Leasing Co., Ltd, the subsidiary of the Bank, received financial support

fund of RMB 94 million from Tianjin Municipal People’s Government under “ the finance and tax preferential

policies on promoting the development of modern service industry in Tianjin” ( JCJ [2006] No.22), Rebates

of value-added tax levied under BT-to-VAT reform of RMB 18 million and fiscal award for the financing to

small and micro enterprises of RMB 2 million. Industrial Guoxin Investment Company received one-time

investing award RMB 3 million from “Investment Promotion Office of Hongkou District .Shanghai”. The Group’s

government grants are all related to profits.

43. Non-operating expenses

UNIT: RMB Million

The Group The Bank

2013 2012 2013 2012

Losses on disposal of non-current assets 34 3 34 3

Including: Losses on disposal of fixed assets 2 3 2 3

Losses on disposal of foreclosed assets 32 - 32 -

Looses from dormant accounts - 2 - 1

Donation expenses 55 18 53 17

Penalties and fines paid 1 3 1 3

Others 40 36 40 36

Total 130 62 128 60

177

44. Income tax expenses

UNIT: RMB Million

The Group The Bank

2013 2012 2013 2012

Current income tax 16,615 13,904 15,824 13,329

Deferred income tax (3,910) (2,631) (3,779) (2,540)

Adjustment income tax for previous year 45 (7) 45 (7)

Total 12,750 11,266 12,090 10,782

The tax charges can be reconciled to the profit as follows:

UNIT: RMB Million

The Group The Bank

2013 2012 2013 2012

Profit before tax 54,261 46,193 51,609 44,270

Tax calculated at applicable

statuory tax rate of 25% 13,565 11,548 12,902 11,068

Adjustments on income tax:

Income not taxable for tax purpose (1,115) (557) (1,104) (554)

Expenses not deductible for

tax purpose 255 282 247 275

Adjustment on income tax for

previous year 45 (7) 45 (7)

Total 12,750 11,266 12,090 10,782

45. Earnings per share

UNIT: RMB Million

The Group

2013 2012

Net profit attributable to

ordinary shareholders of the Bank (RMB million) 41,211 34,718

Weighted average

ordinary shares issued by the Bank (shares in million) 19,052 16,180

Basic and diluted earnings per share (RMB Yuan) 2.16 2.15

Note 1: The Group distributed stock dividends in July 2013, transerred retained earnings to capital, and therefore, earning per

share in each reporting period is recalculated under adjusted shares.

Note 2: As at 31 December 2013 and 31 December 2012, there is no dilutive potential ordinary share of the Group.

178

46. Other comprehensive income

UNIT: RMB Million

The Group The Bank

2013 2012 2013 2012

Profit (loss) generated from the fair value

changes of available-for-sale financial assets (4,926) 914 (4,896) 883

Tax impact from the fair value changes of

available-for-sale financial assets 1,231 (229) 1,224 (221)

Net value recognised in comprehensive income in

last period and currently transferred to profit and loss (90) (509) (94) (500)

Total (3,785) 176 (3,766) 162

179

47. Supplementary information to the cash flow statement

(1) Supplementary information to the cash flow statement

UNIT: RMB Million

The Group The Bank

2013 2012 2013 2012

1. Reconciliation of net profit to cash

flows from operating activities Net profit 41,511 34,927 39,519 33,488

Add: Provision for impairment losses of assets 18,188 12,382 17,691 11,969

Depreciation of fixed assets 835 759 829 755

Amortisation of intangible assets 119 82 116 82

Amortisation of long-term prepaid expenses 450 389 447 386

Losses from disposal of fixed assets,

intangible assets and other long-term assets 28 2 28 2

Interest income of bonds and other investments (34,694) (14,888) (34,458) (14,689)

Interest income of impairment financial assets (387) (189) (387) (189)

Gains (losses) from changes in fair value 1,142 (339) 1,142 (339)

Investment income(losses) (22) 346 127 445

Interest expense for debt securities issued 3,100 3,283 3,100 3,283

Increase in deferred tax assets (3,843) (2,698) (3,712) (2,607)

Decrease(increase) in deferred tax liabilities (67) 67 (67) 67

Increase in receivables of operating activities (209,727) (717,380) (196,840) (704,192)

Increase in payables of operating activites 392,486 799,958 382,104 785,790

Net cash flow from operating activities 209,119 116,701 209,639 114,251

2. Changes in cash and cash equivalents

Closing balance of cash and cash equivalents 127,121 255,133 126,585 255,122

Less: opening balance of cash and cash equivalents 255,133 262,645 255,122 262,643

Net decrease of cash and cash equivalents (128,012) (7,512) (128,537) (7,521)

180

(2) Composition of cash and cash equivalents

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Cash on hand 6,442 5,705 6,442 5,704

Balances with central bank 66,208 92,585 66,205 92,584

Due from banks and other financial institutions

with original maturity of less than three months 19,709 66,521 19,176 66,512

Placements with banks and other financial institutions

with original maturity of less than three months 5,597 10,626 5,597 10,626

Financial assets held under resale agreements with

original maturity of less than three months 21,186 77,485 21,186 77,485

Bonds investment with original

maturity of less than three months 7,979 2,211 7,979 2,211

Closing balance of cash and cash equivalents 127,121 255,133 126,585 255,122

IX. SEGMENT REPORTINGSenior management of the Group evaluates the operations of the Group in accordance with their economic

areas of the respective branches and subsidiaries. Each branch serves its local customers and few customers

in other regions. The Group does not deeply depend on one single external customer. Through the review of

internal reports, the management of the Group conducts performance evaluation and determines the allocation

of resources. Segment reporting is presented in a manner consistent with the Group’s internal management

and reports.

Segment accounting policies are consistent with the accounting policies of the consolidated financial

statements. Inter-segment transfer transactions are measured at the actual transaction prices.

The Group includes the head office (including the head office and the operating institutions of the head office),

Fujian, Beijing, Shanghai, Guangdong, Zhejiang, Jiangsu, northeast and other northern region, western region,

central region, a total of ten segments, of which branches within the northeast and other northern region,

western region, central region are presented in a consolidated manner.

Among them, the northeast and other northern region includes: Harbin branch, Changchun branch, Shenyang

branch, Dalian branch, Tianjin branch, Jinan branch, Qingdao branch and Industrial Bank Financial Leasing

Co., Ltd;

Western region includes: Chendu branch, Chongqing branch, Guiyang branch, Xia’an brach, Kunming branch,

Nanning branch, Urumqi branch and Lanzhou branch.

Central region includes: Hohhot brach, Shijiazhuang branch, Zhengzhou branch, Taiyuan branch, Hefei

branch, Changsha branch, Wuhan branch and Nanchang branch.

181

The

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182

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224

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384

380

574

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UN

IT:

RM

B M

illio

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183

X. RELATED PARTY RELATIONSHIP AND TRANSACTIONS

1. Related Party Relationship

The Group

Related parties with no controlling interest

(1) Shareholders holding more than 5% (inclusive) of the Bank’s shares

NameEconomic

naturePlace of

registrationRegistered

capitalPrincipal activities

Legal representative

The Finance Bureau of Fujian Province

Legal entity of government

agenciesFuzhou -

Administration ofFujian provincial

fiscal and tax policy

Chen Xiaoping

Hang Seng Bank Limited

LimitedCompany

Hong Kong HKD11 billion Financial services Rose Lee

People's Insurance Company of China

IncorporatedCompany

Beijing RMB13.604 billion Insurance services Wu Yan

China Life Insurance Company

IncorporatedCompany

Beijing

RMB25.761 billion Insurance services

Wu Yan

China National Tobacco Corporation

LimitedCompany

Production, and sales of tobacco

productsLing Chengxing

Beijing RMB57 billion

Fujian Tobacco Haisheng Investment Management Company

Limited

CompanyXiamen RMB2.647 billion

Diverse investmentmanagement of

commercial systemin Fujian

Tobacco System

Huang Xueliang

China Tabacco Hunan Investment Management Company

LimitedCompany

Changsha RMB0.2 billion

Diverse investmentmanagement of

commercialsystem in Hunan Tobacco System

Cheng Dongping

The People’s Insurance Company (Group) of China Limited

IncorporatedCompany

Beijing RMB42.424 billion Insurance services Wu Yan

China Tobacco Hunan Industrial Corporation

LimitedCompany

Changsha RMB4.3 billionProduction, and sales

of tobacco productsLu Ping

184

Number of shares held by Shareholders holding more than 5% (inclusive) of the Bank’s shares:

Name of share holders

12/31/2013 12/31/2012

SharesMillion Shares

Proportion(%)

SharesMillion Shares

Proportion(%)

The Finance Bureau of Fujian Province 3,402 17.86 2,268 17.86

Hang Seng Bank Limited 2,070 10.87 1,380 10.87

People's Insurance Company of China 948 4.98 632 4.98

China Life Insurance Company 948 4.98 632 4.98

China National Tabacco Corporation 614 3.22 409 3.22

Fujian Tabacco Haisheng Investment

Management Company 441 2.32 294 2.32

China Tabacco Hunan Investment

Management Company 226 1.19 - -

The people's Insurance Company

(Group) of China Limited 174 0.91 116 0.91

China Tobacco Hunan Industrial

Corporation - - 151 1.19

Total 8,823 46.33 5,882 46.33

Notes of relationship between related parties: People’s Insurance Company of China and China Life Insurance Company are

both subsidiaries of The People’s Insurance Company (Group) of China Limited. The aggregate proportion is 10.87%. Both

Fujian Tabacco Haisheng Investment Management Company and China Tobacco Hunan Investment Managerment Company

are subsidiaries of China National Tabacco Corporation. The aggregate proportion is 6.73%.

According to “The approval of China National Tabacco Corporation on the change in the equity investor of

China Tobacco Hunan Industrial Corporation”, the ownership of 151 million shares held by China Tobacco

Hunan Industrial Corporation will be transferred to China tabacco Hunan investment Management Company(a

subsidiary of China National Tabacco Corporation). The shareholders have completed the transfer of

ownership registration in March 2013.After the changes, China tabacco Hunan Investment Management

Company held 151 million shares. With the dividend distribution of this year, it held 226 million shares, its total

share capital of the Bank accounted for 1.19%.

(2) Associates

Name of related partyEconomic

natureDomicile

RegisteredCapital

RMB100 million

BusinessScope

LegalRepresentative

Bank of Jiujiang Co., Ltd.Incorporated

CompanyJiujiang 15.16 Financial Service Liu Xianting

Chongqing Machinery and Electronics Holding Group Finance Company Limited

LimitedCompany

Chongqing 6 Financial and

FinancingConsulting Service

Wang Yuxiang

185

(3) Other related party

Other related party includes key management personnel (including directors, supervisors, the senior management

personnel of the head office ), key management personnel or close family members who have control or joint

control of the enterprise and the subsidiary of Hang Seng Bank Limited, Hang Seng Bank (China) Limited.

2. Related party transactions

The conditions and prices of related party transactions between the Group and the Bank are determined

according to the Group’s contract, and are exanmined and approved in accordance with the transaction type

and content of transaction by corresponding decision-making authority.

For newly added related parties, China Tabacco Hunan Investment Management Company, comparative

numbers in previous year has not been disclosed.

(1) Interest income

UNIT: RMB Million

Related party 2013 2012

Hang Seng Bank Limited - 1

People's Insurance Company of China 46 37

The people's Insurance Company

(Group) of China Limited 43 -

Bank of Jiujiang Co., Ltd 41 83

Chongqing Machinery and Electronics

Holding Group Finance Company Limited 214 -

Total 344 121

(2) Interest expense

UNIT: RMB Million

Related party 2013 2012

The Finance Bureau of Fujian Province 341 211

Hang Seng Bank Limited 5 4

Hang Seng Bank (China) Limited 12 1

People's Insurance Company of China 34 -

China Life Insurance Company 13 1

China National Tabacco Corporation 419 275

Haisheng Investment Management Company of Fujian Tabacco 40 2

China Tobacco Hunan Industrial Corporation 4 40

Bank of Jiujiang Co., Ltd 22 -

Chongqing Machinery and Electronics

Holding Group Finance Company Limited 17 -

Total 907 534

186

(3) Net fee and commission income

UNIT: RMB Million

Related party 2013 2012

Bank of Jiujiang Co., Ltd. 8 7

(4) General and administrative expenses-insurance

UNIT: RMB Million

Related party 2013 2012

People's Insurance Company of China 105 -

In 2013, the Bank was paid RMB 73 million in compensation from People’s Insurance Company of

China(2012:Nil).

3. Unsettled amount of related party transactions

Because the shares have been transferred from China Tobacco Hunan Industrial Corporation to China

Tabacco Hunan Investment Management Company in March 2013, the unsettled amount of related party

transactions of China Tobacco Hunan Industrial Corporation didn’t been disclosed as at 31 December 2013.

(1) Due from banks

UNIT: RMB Million

Related party 12/31/2013 12/31/2012

Hang Seng Bank Limited 11 11

(2) Placements with banks

UNIT: RMB Million

Related party 12/31/2013 12/31/2012

Bank of Jiujiang Co., Ltd. - 1,275

187

(3) Derivative financial instruments

UNIT: RMB Million

Related party Transaction Type 12/31/2013 12/31/2012

Nominal amount Fair value Nominal amount Fair value

Hang Seng Bank(China) Limited

InterestRate Derivative

4,130 3 5,925 (1)

Hang Seng Bank(China) Limited

ExchangeRate Derivative

8,024 6 2,763 2

China Life Insurance Company

InterestRate Derivative

1,300 (2) 1,300 (15)

Total 13,454 7 9,988 (14)

(4) Financial assets held under resale agreements

UNIT: RMB Million

Related party 12/31/2013 12/31/2012

Bank of Jiujiang Co., Ltd. 434 2,190

Chongqing Machinery and Electronics

Holding Group Finance Company Limited 15,584 -

Total 16,018 2,190

(5) Interest receivable

UNIT: RMB Million

Related party 12/31/2013 12/31/2012

People's Insurance Company of China 10 10

The people's Insurance Company

(Group) of China Limited 43 -

Bank of Jiujiang Co., Ltd 1 32

Chongqing Machinery and Electronics

Holding Group Finance Company Limited 198 -

Total 252 42

188

(6) Investment classified as receivables

UNIT: RMB Million

Related party 12/31/2013 12/31/2012

People's Insurance Company of China 850 850

China Life Insurance Company 200 -

The people's Insurance Company

(Group) Of China Limited 1,600 -

Total 2,650 850

All the investment classified as receivables are the bonds issued by the above-mentioned related parties.

(7) Loans and advances to customers

UNIT: RMB Million

Related party 12/31/2013 12/31/2012

Key management personnel and their close relatives 10 11

(8) Due to banks and other financial institution

UNIT: RMB Million

Related party 12/31/2013 12/31/2012

Hang Seng Bank Limited 29 485

Hang Seng Bank (China) Limited 571 11

Bank of Jiujiang Co., Ltd. 5 2,198

Chongqing Machinery and Electronics

Holding Group Finance Company Limited 436 -

Total 1,041 2,694

(9) Placements from banks

UNIT: RMB Million

Related party 12/31/2013 12/31/2012

Hang Seng Bank Limited 168 1,131

Hang Seng Bank (China) Limited 32 250

Total 200 1,381

189

(10) Due to customers

UNIT: RMB Million

Related party 31/12/2013 31/12/2012

The Finance Bureau of Fujian Province 16,081 14,489

China Life Insurance Company 496 840

People's Insurance Company of China 701 102

China National Tabacco Corporation 19,003 11,662

Haisheng Investment Management Company of Fujian Tabacco 1,120 835

China Tobacco Hunan Industrial Corporation 54 -

Chongqing Machinery and Electronics

Holding Group Finance Company Limited 27 -

Key managers and their close relatives 20 17

Total 37,502 27,945

(11) Interest payable

UNIT: RMB Million

Related party 12/31/2013 12/31/2012

The Finance Bureau of Fujian Province 201 -

Hang Seng Bank Limited - 1

Hang Seng Bank (China) Limited 2 1

People's Insurance Company of China 12 -

China Life Insurance Company 4 -

China National Tabacco Corporation 221 -

Haisheng Investment Management Company of Fujian Tabacco 38 -

Total 478 2

(12) Other payables

UNIT: RMB Million

Related party 12/31/2013 12/31/2012

The Finance Bureau of Fujian Province - 2

190

(13) Credit facility

UNIT: RMB Million

Related party 12/31/2013 12/31/2012

Hang Seng Bank Limited & Hang Seng Bank (China) Limited

3,000 2,000

The people's Insurance Company (Group) of China Limited & its subsidiaries

5,000 -

Total 8,000 2,000

4. Key management personnel remuneration

UNIT: RMB Million

Related party 2013 2012

Salary and welfare 40 45

XI. CONTINGENCIES AND COMMITMENTS

1. Pending Litigations

On balance sheet date, the Group’s management considers that there is no pending litigation which has a

significant impact on the financial statements that needs to be disclosed.

2. Off-balance sheet items

UNIT: RMB Million

The Group and the Bank

Contractual amount

12/31/2013 12/31/2012

Credit card commitments 41,341 6,450

Letters of credit 129,383 69,233

Letters of guarantee 53,152 25,429

Bank acceptances 452,710 392,352

Reimbursement refinances - 50, 004

Total 676,586 543,468

In addition, the Group also provides credit facilities to specific customers. According to the management’s

opinion, since such credit facilities are conditional and can be canceled, the Group is not committed to these

customers for the credit risk of the undrawed facilities.

191

3. Capital commitments

UNIT: RMB Million

Contractual amount of the Group Contractual amount of the Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Authorised but not contracted for 1,138 104 1,138 104

Contracted but not paid for 4,884 296 4,883 293

Total 6,022 400 6,021 397

4. Operating lease commitments

As a tenant, according to the non-cancellable lease contracts, the required minimum lease payments by the

Group and the Bank are as follows:

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Within one year 1,466 1,883 1,433 1,859

One to five years 4,159 3,061 4,151 3,035

Over five years 1,705 1,232 1,705 1,232

Total 7,330 6,176 7,289 6,126

5. Collateral

(1) Assets pledged

The carrying amount of assets pledged as collateral under repurchase agreements is as follows:

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Bonds 51,463 101,812 51,463 101,812

Bills 18,729 47,398 18,729 47,398

Others 9,882 11,976 6,757 11,976

Total 80,074 161,186 76,949 161,186

On 31 December 2013, the bills purchased under resale agreements of the Group used for sale under

repurchase agreements amount to RMB18,598 million (31 December 2012: RMB47,398 million).

(2) Collateral obtained

In the resale agreement, if the counterparty of the transaction has not violated the contractual terms, the

Group can sell some of the pledged assets or transfer the pledged assets in other transactions. The fair value

of the pledged assets available for sale and available for pledge on 31 December 2013 is RMB353,018 million.

(31 December 2012: RMB370,452 million).

192

6. Redemption commitment of certificate government bonds and saving government bonds

(1) The Group entrusted by the MOF as its agent issues certificate government bonds and saving government

bonds. Holders of certificate government bonds and saving government bonds can require advance

redemption, and the Group has the obligation to execute the redemption responsibility. Redemption amount

for the certificate government bonds and saving government bonds includes principal and interest payable till

redemption date.

As of 31 December 2013and 31 December 2012, the cumulative principal balances of the certificate

government bonds and saving government bonds which are issued by the Group under trust prior to maturity

and not been paid are as follows:

UNIT: RMB Million

The Group and the Bank

Contractual amount

12/31/2013 12/31/2012

Certificate government bonds and saving government bonds 3,899 4,071

The Group believes, before maturity date of certificate government bonds and saving government bonds, the

amount redempyed by the Group is not significant.

(2) The Group has no announced but unissued bonds underwriting amount on 31 December 2013(31

December 2012: Nil).

7. Fiduciary Business

UNIT: RMB Million

The Group and the Bank

12/31/2013 12/31/2012

Fiduciary deposits and loans 365,237 133,608

Fiduciary wealth management 461,506 417,222

Fiduciary investment 13,331 -

Fiduciary deposits and loans are deposits and loans that depositor designated specific third party as the loan

party, and related credit risk of the loan is borne by depositors who designated borrowers.

Fiduciary wealth management refers to a kind of service that the entrusted Group is responsible for the

operation and management of customer assets. The investment risk of fiduciary wealth management is borne

by the trustee.

Fiduciary investment refers to a kind of service that the entrusted Group engaged in capital operation,

investment management, investment advisory and other investment services based on the principal-agent

relationship. The investment risk of fiduciary investment is borne by the trustee.

193

XII. OTHER SIGNIFICANT EVENTS

1. Assets and liabilities measured at fair value

UNIT: RMB Million

The Group

2013

Opening Balance

Profit or loss arising from

changes in fair value for the

period

Changesin fair value

recognised in equity

Provision for impairment

losses in thecurrent period

Closing Balance

Held-for-trading financial assets 21,540 (595) - - 42,295

Derivative financial assets 3,266 3,148 - - 6,414

Available-for-sale financial assets 192,057 - (6,144) - 263,681

Total 216,863 2,553 (6,144) - 312,390

Financial liabilities (1) (2,996) (3,858) - - (8,080)

UNIT: RMB Million

The Bank

2013

Opening Balance

Profit or loss arising from

changes in fair value for the

period

Changesin fair value

recognised in equity

Provision for impairment

losses in thecurrentperiod

Closing Balance

Held-for-trading financial assets 21,540 (595) - - 42,267

Derivative financial assets 3,266 3,148 - - 6,414

Available-for-sale financial assets 190,084 - (6,132) - 261,104

Total 214,890 2,553 (6,132) - 309,785

Financial liabilities (1) (2,996) (3,858) - - (8,080)

(1) Financial liabilities include held-for-trading financial liabilities and derivative financial liabilities.

(2) The items of assets and liabilities listed on the above tables have no inevitable relationship.

194

2. Financial assets and financial liabilities denominated in foreign currencies

UNIT: RMB Million

The Group

2013

Opening Balance

Profit or loss arising fromchanges in

fair value for the

period

Changesin fair value recognised

in equity

Provision for impairment

losses in thecurrent period

Closing Balance

Cash and balances with central bank 6,989 - - - 8,615

Due from banks and other

financial institutions 24,178 - - - 10,778

Placements with banks and other

financial institutions 7,417 - - - 1,000

Derivative financial assets 983 (670) - - 313

Loans and advances to customers 103,322 - - 884 104,802

Available-for-sale financial assets 1,050 - 56 - 2,139

Held-to-maturity investments 854 - - - 336

Other financial assets 1,562 - - - 1,201

Total of financial assets 146,355 (670) 56 884 129,184

Financial liabilities (1) (151,499) (1,095) - - (180,043)

UNIT: RMB Million

The Bank

2013

Opening Balance

Profit or loss arising fromchanges in

fair value for the

period

Changesin fair value recognised

in equity

Provision for impairment

losses in thecurrent period

Closing Balance

Cash and balances with central bank 6,989 - - - 8,615

Due from banks and other

financial institutions 24,178 - - - 10,778

Placements with banks and other

financial institutions 7,417 - - - 1,000

Derivative financial assets 983 (670) - - 313

Loans and advances to customers 103,322 - - 884 104,802

Available-for-sale financial assets 1,050 - 56 - 2,139

Held-to-maturity investments 854 - - - 336

Other financial assets 1,562 - - - 950

Total of financial assets 146,355 (670) 56 884 128,933

Financial liabilities(1) (151,499) (1,095) - - (180,128)

(1) Financial liabilities include due to banks and other financial institutions, placements from banks and other

financial institutions, held-for-trading financial liabilities, financial assets sold under repurchase agreements,

derivative financial liabilities, due to customers and debt securities issued, etc,.

(2) The items of assets and liabilities listed on the above tables have no inevitable relationship.

195

XIII. FINANCIAL RISK MANAGEMENT

1. Overview

The Group is exposed to various types of risk due to its banking business. The Group identifies, assesses and

monitors various risks on an on-going basis. The most significant types of risk to which the Group is exposed

are credit risk, market risk, liquidity risk and operation risk. Market risk includes interest rate risk, foreign

currency risk and other price risk.

The Group’s risk management objectives are to achieve a proper balance between risks and benefits and run

business safely and prudently under reasonable level of risk.

2. Risk management framework

Risk management is the basic safeguard of survival and development of commercial banks. The Group

has taken risk management as one of its core competitiveness, formulated development strategy focus on

business operation as well as risk management, established risk control system with a core of risk asset

management, set up risk management rules and operation regulations for each business sector, improved

risk accountability and punishment mechanism. The Group has integrated credit risk, market risk, liquidity

risk, operational risk and other risk into the overall risk management, clarified specific responsibility of Board

of Directors, Board of Supervisors, senior management and operation executives, formed a defined, clear

and effective overall risk management system. In daily risk management work, the Group’s business sector,

risk management department and internal audit department build up the “three defenses”; they perform their

respective functions and work together to achieve the objective of risk management. Among them, operation

institutions and business sector form the first line of defense to conduct risk management according to the risk

management rules and policies. Operation institutions take precautions against all the business and operating

risk, while business sector is in charge of making its risk management policy, evaluating the effectivenss

of risk management regularly and taking corrective actions if necessary.The risk management department

is the second line of defense, which is responsible for the constitution of the Group’s risk management

strategy, policy, regulations and process, and supervision of the execution. Meanwhile, the risk management

department is responsible for the identification, evaluation and supervision of the risk that the Group faces,

assessing the Group’s risk condition periodically, taking measures for continuously improvement, pushing

forward the outspread of overall risk management work. The internal audit department is the third line of

defense. It provides independent, objective supervision, evaluation and consultation to the Group’s risk

management, provides post-event risk management assessment and feedback adjustment.

3. Credit risk

Credit risk represents the potential loss that may arise from a customer or counterparty’s failure to meet its

obligation. Credit risk can also arise from operational failures that result in an unauthorised or inappropriate

advance, commitment or investment of funds. The Group’s major credit risks come from loans and receivables,

treasury operations and off-balance sheet related credit risk exposures. The Group manages and controls

credit risk according to the following processes: customer investigation before granting of credit limits, credit

review and approval and post-disbursement loan monitoring and collection.

The Group establish the risk management department, which is responsible for organizing, implementing the

credit risk management strategies and policies of the group, it is also responsible for making basic rules for the

group risk management affairs, in addition, it is also professionally managing, evaluating, guiding the general

operation of the group risk management together with inspecting and supervising the activities mentioned

above. As the leading party, the risk management department formulates unified standards, responsible for

the credit management on the whole. All the actions taken are to ensure the overall credit risk under control.

196

The group set up risk management department and professional risk management desk in all the three major

lines called enterprise financial line, retail banking line and financial markets line. Each of the risk departments

is responsible for the credit management in its own line or professional operating department, and it is also

responsible for making detailed regulation and operating rules and approving projects within the approving

authority. The Group also sets up several specialized committees such as Credit Approval Committee and

Credit Accountability Committee. The first one is responsible for the examination and approval of the loans

within the authority. The other one is responsible for determining the responsibility of related loans.

The Group has formulated a whole set of credit policies on approval process and management procedure,

and implemented throughout the Group. The credit management procedure for corporate and personal

loans can be classified as credit investigation, credit examination, credit approval, credit disbursement, and

post disbursement monitoring and recovery process. In addition, the Group issued “Due diligence of credit

approval” to clarify the duties of different positions, to effectively control the credit risk, and to strengthen

compliance of credit business.

The Group set up detailed rules for implementing of credit policy, which intensified the credit support for the

real economy. In accordance with the discriminative credit policy of “protecting, controlling, and pressing”,

the Group also goes along with the policy that “speeds up the transforming of economy development mode,

intensifies the adjustment of economic structure, and ties to the core spirit of protecting & improving the

people’s livelihood”. The Group accurately understands the credit layout of mainstream business, give

more financial support to related entities in key industry or field, strengthen the credit management over

the industries that involves in “ high contaminative, high level of energy consumption, and industries over

capacities” .The group compresses and gradually withdraws projects that belong to the restrictive and

eliminative list of backward production capacity, and continue to promote the structure optimization and

adjustment of credit assets.

The Group has established a customer credit rating system which comprehensively and systematically

investigated various factors and variation trends that influence customer solvency in future; disclosed and

evaluated customers’ credit risks and capabilities based on qualitative and quantitative analysis. Credit rating

results become an important foundation to draw up credit service polices, adjust and optimize client structure,

as well as identify credit service of individual customer. The Group has developed and established the non-

retail section of internal rating system according to the Basel New Capital Accord and the relevant guidelines

of CBRC, the accomplishment is put into practice in risk management such as business authorization,quota

management and development of client to enhance the ability of credit risk identification, estimation and

control. The retail section of internal rating system is in progress.

The Group strengthens the monitoring and warning of credit operations by drawing up Corporate Customer

Risk Warning Regulations and Personal Credit Risk Warning Regulations, so that a variety of credit risk

information can be accessed through internal and external sources. Also, warnings would be notified and

relevant procedures would be carried out to prevent and overcome risks. Besides, the Group develops the

credit management information system to provide management information and advices 24/7 to detect and

prevent the credit risk through conducting dynamic monitoring, real-time warning and pre-controlling of

customer operation status and credit assets status of the Group.

The Group deals with the relationship between risk management and development by establishing quota

management implementation plan, so as to strenthen the real-time warning of credit concentration risk for

those emphasized credit industries. The Group will re-adjust and optimize the quota among industries, which

advices the branches to optimize structure and control credit concentration risk.

In order to accurately identify the risk profile of credit assets and reasonably reflect the risk-adjusted earnings

position, the Group establishes Implementation Rules of Credit Assets Risk Classification, Implementation

Standards of Credit Assets Risk Classification, etc., guiding the operating units to optimize the allocation of

197

capital and credit resources and strengthen the awareness of risk management. Based on the five grades

classification method established by CBRC, the Company further classifies its credit assets into nine grades:

normal 1, 2 and 3; special mention 1, 2 and 3; substandard; doubtful and loss. Different management policies

are addressed to the credit assets according to their grades. Provision is also made for these credit assets

according to their grades.

Risk arises from credit commitment is similar with risk associate with loans and advances to customer.

Therefore, the requirements for application, post disbursement management and collateral and other

enhancements for these transactions are the same with the requirements for loans and advances to customer.

3.1 Concentration of credit risk

Concentration of credit risk exists when changes in geographic, economic or industry factors similarly

affect groups of counterparties whose aggregate credit exposure is material in relation to the Group’s total

exposures. The Group’s portfolio of financial instrument is diversified along geographic, industry and product

sectors.

The Group operates the lending business in the PRC mainland only. Since there are different economic

development characteristics in the different regions in China, the characteristics of credit risks are also

different.

For the geographical and industrial concentration of the loans and advances to customers please refer to Note

VIII 8.

3.2 Maximum exposure to credit risk

The maximum exposure to credit risk represents a worst case scenario of credit risk exposure to the Group at

the balance sheet date without taking into consideration of any collateral held or other credit enhancements

attached. The Group’s credit risk exposure mainly derives from credit business and debt investment business.

In addition, off-balance sheet instruments also have credit risk, such as derivatives transaction, loan

commitments, acceptances, letters of guarantee and letters of credit, etc.

198

At the balance sheet date, maximum exposure to credit risk is as follows:

UNIT: RMB Million

The Group The Bank

12/31/2013 12/31/2012 12/31/2013 12/31/2012

Balances with central bank 416,429 385,926 416,241 385,729

Due from banks and other financial institutions 62,845 164,642 62,313 164,633

Placements with banks and other

financial institutions 87,091 214,812 87,177 214,812

Held-for-trading financial assets 42,271 21,540 42,267 21,540

Derivative financial assets 6,414 3,266 6,414 3,266

Financial assets held under

resale agreements 921,090 792,797 921,090 792,797

Loans and advances to customers 1,320,682 1,204,542 1,320,682 1,204,394

Available-for-sale financial assets 263,432 191,631 261,089 190,066

Debt securities classified

as receivables 328,628 111,360 326,963 110,178

Finance lease receivables 46,094 33,779 - -

Held-to-maturity investments 117,655 69,199 117,655 69,199

Other financial assets (1) 32,778 28,186 26,785 22,586

Total on-balance sheet 3,645,409 3,221,680 3,588,676 3,179,200

Total off-balance sheet 676,586 543,468 676,586 543,468

Total 4,321,995 3,765,148 4,265,262 3,722,668

(1) Other financial assets mainly include interest receivable, other receivables, prepaid purchase cost of

finance lease assets and items in the process of clearance and settlement.

199

3.3 Analysis of exposure to credit risk of the Group and the Bank about loans and advances to customers, inter-bank placement, investment and finance lease receivables

UNIT: RMB Million

The Group

12/31/2013

Loans and advances

to customers

Inter-bankplacement(1) Investment(2) Finance lease

receivablesTotal

Impaired:

Individual assessment

Total assets 8,381 89 509 - 8,979

Provision for impairment (3,139) (89) (215) - (3,443)

Net value of assets 5,242 - 294 - 5,536

Collective assessment

Total assets 1,950 - - - 1,950

Provision for impairment (1,345) - - - (1,345)

Net value of assets 605 - - - 605

Past due but not impaired:

Total assets 4,490 - - - 4,490

Including:

Within 90 days 4,055 - - - 4,055

90 to 360 days 435 - - - 435

360 days to 3 years - - - - -

Provision for impairment (668) - - - (668)

Net value of assets 3,822 - - - 3,822

Neither past due nor impaired:

Total assets 1,342,236 1,071,026 752,971 47,321 3,213,554

Provision for impairment (31,223) - (1,279) (1,227) (33,729)

Net value of assets 1,311,013 1,071,026 751,692 46,094 3,179,825

Total of net value of assets 1,320,682 1,071,026 751,986 46,094 3,189,788

200

UNIT: RMB Million

The Group

12/31/2012

Loans and advances

to customers

Inter-bankplacement(1) Investment(2) Finance lease

receivablesTotal

Impaired:

Individual assessment

Total assets 4,334 89 126 - 4,549

Porvision for impairment (2,025) (89) (126) - (2,240)

Net value of assets 2,309 - - - 2,309

Collective assessment

Total assets 953 - - - 953

Provision for impairment (506) - - - (506)

Net value of assets 447 - - - 447

Past due but not impaired:

Total assets 3,873 - - - 3,873

Including:

Within 90 days 3,542 - - - 3,542

90 to 360 days - - - - -

360 days to 3 years 331 - - - 331

Provision for impairment (326) - - - (326)

Net value of assets 3,547 - - - 3,547

Neither pass due nor impaired:

Total assets 1,220,005 1,172,251 393,881 34,490 2,820,627

Provision for impairment (21,766) - (151) (711) (22,628)

Net value of assets 1,198,239 1,172,251 393,730 33,779 2,797,999

Total of net value of assets 1,204,542 1,172,251 393,730 33,779 2,804,302

201

UNIT: RMB Million

The Bank

12/31/2013

Loans and advances

to customers

Inter-bankplacement(1) Investment(2) Total

Impaired:

Individual assessment

Total assets 8,381 89 509 8,979

Provision for impairment (3,139) (89) (215) (3,443)

Net value of assets 5,242 - 294 5,536

Collective assessment

Total assets 1,950 - - 1,950

Provision for impairment (1,345) - - (1,345)

Net value of assets 605 - - 605

Past due but not impaired:

Total assets 4,490 - - 4,490

Including:

Within 90 days 4,055 - - 4,055

90 to 360 days 435 - - 435

360 days to 3 years - - - -

Provision for impairment (668) - - (668)

Net value of assets 3,822 - - 3,822

Neither past due nor impaired:

Total assets 1,342,236 1,070,580 748,959 3,161,775

Provision for impairment (31,223) - (1,279) (32,502)

Net value of assets 1,311,013 1,070,580 747,680 3,129,273

Total of net value of assets 1,320,682 1,070,580 747,974 3,139,236

202

UNIT: RMB Million

THE BANK

12/31/2012

Loans and advances

to customers

Inter-bankplacement(1)

Investment(2) Total

Impaired:

Individual assessment

Total assets 4,334 89 126 4,549

Provision for impairment (2,025) (89) (126) (2,240)

Net value of assets 2,309 - - 2,309

Collective assessment

Total assets 953 - - 953

Provision for impairment (506) - - (506)

Net value of assets 447 - - 447

Past due but not impaired:

Total assets 3,873 - - 3,873

Including:

Within 90 days 3,542 - - 3,542

90 to 360 days - - - -

360 days to 3 years 331 - - 331

Provision for impairment (326) - - (326)

Net value of assets 3,547 - - 3,547

Neither past due nor impaired:

Total assets 1,219,856 1,172,242 391,134 2,783,232

Provision for impairment (21,765) - (151) (21,916)

Net value of assets 1,198,091 1,172,242 390,983 2,761,316

Total of net value of assets 1,204,394 1,172,242 390,983 2,767,619

(1) Inter-bank placement includes due from banks and other financial institutions, placements with banks and

other financial institutions and financial assets sold under repurchase agreements.

(2) Investment includes held-for-trading financial assets, available-for-sale financial assets, held-to-maturity

investments and debt investment of debt securities classified as receivables.

203

3.4 Collateral and other credit enhancements

The amount and type of collateral required depend on the assessment of the credit risk of the counterparty.

The pledge rate depends on the credit information, operation and management, and financial position of

pledgors, the condition of collateral, the market price, the pledged periods, and the convertibility of collateral.

In addition, the Collateral Guideline of the Group set an upper limit of the pledged rate. Furthermore, the

Group classifies and manages collateral by the difficulty of appraisal and management, the stability of market

price and the convertibility of collateral. Following are the main types of collateral:

● For reverse repurchase agreements, collateral mainly includes bills, loans and securities

● For commercial loans, collateral mainly includes land, properties, equipment and shares, etc.

● For retail loans, collateral mainly includes properties

The management will monitor the market value of the collateral, ask the borrowers to increase collateral if

necessary according to the agreements and monitor the change in the market value of the collateral when

reviewing the adequacy of impairment.

3.5 Analysis of collateral value

3.5.1 The Group evaluates the fair value of collateral periodically

A. As at 31 December 2013, the fair value of collateral that related to loans past due but not impaired

amounted to RMB 7,294 million (31 December 2012: RMB 6,055 million). The collateral includes land,

properties, equipment and shares.

B. As at 31 December 2013, the fair value of collateral that related to loans individually assessed to be

impaired amounted to RMB4, 874 million (31 December 2012: RMB2,143 million). The collateral includes

land, properties, equipment and shares.

3.5.2 The book value of foreclosed assets the Group obtained during 2013 amounted to RMB34 million (2012:

RMB101 million).

3.6 Rescheduled loans and advances

As at 31 December 2013, the carrying amount of rescheduled loans and advances to customers amounted

to RMB996 million (31 December 2012: RMB981 million). The carrying amount of rescheduled loans and

advances to customers past due over 90 days amounted to RMB106 million (31 December 2012: RMB108

million).

4. Market risk

Market risk is the risk of loss, in respect of the Group’s on and off-balance sheet activities, arising from

movements in market rates including interest rates, foreign exchange rates, commodity prices and stock

prices. Market risk arises from both the Group’s proprietary and customer driven business. The Group’s

market risk management objective is to control the market risk within a reasonable scope in order to achieve

the optimal risk adjusted benefit.

According to the Group’s market risk management structure, market risk management is critical for the

management of the Group’s assets and liabilities. Any major events should be reported to the Asset and

204

Liability Management Committee for review and then authorized by President of the Bank. The planning

and financial department is responsible for implementing the Group’s asset and liability management policy,

analyzing and monitoring the implementation status of each type of indicators.

For daily control and management of treasury business, the risk management department of the treasure

center built up mid-stage risk control system to carry out an implanting risk management and report to the risk

management department of the Group.

4.1 Interest rate risk

The interest rate risk of the Group includes repricing risk, yield curve risk, benchmark risk and optional risk,

among which repricing risk is the main risk. It is the risk arising from the mismatch between the agreed

maturity date and the repricing date of interest bearing assets and interest payment liabilities. Currently, the

Group has fully carried out the internal capital transfer pricing. The Group determined the transfer pricing

by different products and terms, and gradually centralized the interest rate risk to the Head Office, so as to

improve the efficiency of management and control the interest rate risk.

For the interest risk management of bank accounts, the Group mainly evaluates the interest rate risk of

balance sheet through gap analysis. The Group dynamically monitors and controls the interest rate sensitive

gap of balance sheet through information systems like assets-liabilities management system, and simply

calculates the interest rate sensitivity affected by revenue and economic value on the basis of gap analysis.

The revenue analysis emphasizes on the effect of the interest rate fluctuation on short-term income, while the

economic value analysis emphasizes on the effect of the interest rate fluctuation on present value of net cash

flow.

For the interest risk management of transaction accounts, the Group mainly achieves the real-time monitoring

of the interest rate risk of the trading accounts through the quota system, the use of financial transactions and

analysis system and the scientific exposure measurement models. According to regulatory requirement, the

Group has strengthened the management of market risk measurement models, standardized the developing,

testing and commissioning process, and built on regular evaluation mechanisms to ensure the accuracy of

measurement models. The Group applies the on-line trading and analysis system to timely measure and

control the interest rate risk exposure of transaction accounts, which provides effective technical support to

control the interest rate risk of transaction accounts.

205

At the balance sheet date, an analysis of contractual repricing date or maturity date, whichever is earlier, of

the financial assets and liabilities are as follows:

UNIT: RMB Million

The Group

12/31/2013

Within 3months

3-12months

1-5years

Over 5years

Non-interest bearing

Total

Financial assets:

Cash and balances with central bank 408,431 - - - 14,440 422,871

Due from banks and other

financial institutions 33,976 18,367 10,502 - - 62,845

Placements with banks and other

financial institutions 41,648 43,543 1,900 - - 87,091

Held-for-trading financial assets 12,396 15,027 13,942 902 28 42,295

Derivative financial assets - - - - 6,414 6,414

Financial assets held under

resale agreements 380,717 288,180 252,193 - - 921,090

Loans and advances to customers 810,834 478,016 28,609 3,223 - 1,320,682

Available-for-sale financial assets 19,605 55,211 146,986 41,381 498 263,681

Debt securities classified as receivables 27,235 76,723 189,401 35,269 - 328,628

Finance lease receivables 45,766 - 328 - - 46,094

Held-to-maturity investments 4,741 901 23,917 88,096 - 117,655

Other assets 5,553 - - - 27,225 32,778

Total financial assets 1,790,902 975,968 667,778 168,871 48,605 3,652,124

Financial liabilities:

Due to banks and other

financial institutions 799,959 193,698 13,887 - - 1,007,544

Placements from banks and other

financial institutions 42,437 30,467 5,368 - - 78,272

Held-for-trading financial liabilities - - - - 1,216 1,216

Derivative financial liabilities - - - - 6,864 6,864

Financial assets sold under

repurchase agreements 67,018 11,638 3,125 - - 81,781

Due to customers 1,415,464 514,114 237,413 271 3,083 2,170,345

Debt securities issued 2,993 2,001 41,961 20,946 - 67,901

Other liabilities - - 40 - 38,292 38,332

Total financial liabilities 2,327,871 751,918 301,794 21,217 49,455 3,452,255

Net position (536,969) 224,050 365,984 147,654 (850) 199,869

206

UNIT: RMB Million

The Group

12/31/2012

Within 3 months

3-12months

1-5 yearsOver 5

years

Non-interest bearing

Total

Financial assets:

Cash and balances with central bank 379,037 - - - 12,594 391,631

Due from banks and other

financial institutions 87,799 72,325 4,518 - - 164,642

Placements with banks and other

financial institutions 117,322 97,490 - - - 214,812

Held-for-trading financial assets 2,638 5,305 10,107 3,490 - 21,540

Derivative financial assets - - - - 3,266 3,266

Financial assets held under

resale agreements 335,443 344,377 112,977 - - 792,797

Loans and advances to customers 670,181 515,569 16,657 2,135 - 1,204,542

Available-for-sale financial assets 17,559 23,123 105,956 44,393 1,026 192,057

Debt securities classified

as receivables 8,059 29,740 65,354 8,207 - 111,360

Finance lease receivables 33,779 - - - - 33,779

Held-to-maturity investments 285 2,014 8,911 57,989 - 69,199

Other assets 5,396 - - - 22,790 28,186

Total financial assets 1,657,498 1,089,943 324,480 116,214 39,676 3,227,811

Financial liabilities:

Due to banks and other

financial institutions 806,378 84,258 3,800 - - 894,436

Placements from banks and other

financial institutions 59,101 29,288 - - - 88,389

Held-for-trading financial liabilities - - - - - -

Derivative financial liabilities - - - - 2,996 2,996

Financial assets sold under

repurchase agreements 149,719 12,143 - - - 161,862

Due to customers 1,154,334 421,334 234,971 10 2,617 1,813,266

Debt securities issued - 5,078 42,947 20,944 - 68,969

Other liabilities 22 - - - 31,351 31,373

Total financial liabilities 2,169,554 552,101 281,718 20,954 36,964 3,061,291

Net position (512,056) 537,842 42,762 95,260 2,712 166,520

207

UNIT: RMB Million

The Bank

12/31/2013

Within 3 months

3-12months

1-5 yearsOver 5

years

Non-interest bearing

Total

Financial assets:

Cash and balances with central bank 408,243 - - - 14,440 422,683

Due from banks and other

financial institutions 33,444 18,367 10,502 - - 62,313

Placements with banks and other

financial institutions 41,734 43,543 1,900 - - 87,177

Held-for-trading financial assets 12,396 15,027 13,942 902 - 42,267

Derivative financial assets - - - - 6,414 6,414

Financial assets held under

resale agreements 380,717 288,180 252,193 - - 921,090

Loans and advances to customers 810,834 478,016 28,609 3,223 - 1,320,682

Available-for-sale financial assets 19,605 55,151 146,031 40,302 15 261,104

Debt securities classified

as receivables 27,222 76,421 188,051 35,269 - 326,963

Held-to-maturity investments 4,741 901 23,917 88,096 - 117,655

Other assets - - - - 26,785 26,785

Total financial assets 1,738,936 975,606 665,145 167,792 47,654 3,595,133

Financial liabilities:

Due to banks and other

financial institutions 801,835 193,698 13,887 - - 1,009,420

Placements from banks other

financial institutions 32,336 8,291 - - - 40,627

Held-for-trading financial liabilities - - - - 1,216 1,216

Derivative financial liabilities - - - - 6,864 6,864

Financial assets sold under

repurchase agreements 67,018 11,638 - - - 78,656

Due to customers 1,415,464 514,114 237,413 271 3,083 2,170,345

Debt securities issued 2,993 2,001 41,961 20,946 67,901

Other liabilities - - - - 33,595 33,595

Total financial liabilities 2,319,646 729,742 293,261 21,217 44,758 3,408,624

Net position (580,710) 245,864 371,884 146,575 2,896 186,509

208

UNIT: RMB Million

The Bank

12/31/2012

Within 3 months

3-12months

1-5 yearsOver 5

years

Non-interestbearing

Total

Financial assets:

Cash and balances with central bank 378,839 - - - 12,594 391,433

Due from banks and other

financial institutions 87,790 72,325 4,518 - - 164,633

Placements with banks and other

financial institutions 117,322 97,490 - - - 214,812

Held-for-trading financial assets 2,638 5,305 10,107 3,490 - 21,540

Derivative financial assets - - - - 3,266 3,266

Financial assets held under

resale agreements 335,443 344,377 112,977 - - 792,797

Loans and advances to customers 670,033 515,569 16,657 2,135 - 1,204,394

Available-for-sale financial assets 17,559 23,123 105,842 43,542 18 190,084

Debt securities classified

as receivables 8,028 29,204 64,739 8,207 - 110,178

Held-to-maturity investments 285 2,014 8,911 57,989 - 69,199

Other assets - - - - 22,586 22,586

Total financial assets 1,617,937 1,089,407 323,751 115,363 38,464 3,184,922

Financial liabilities:

Due to banks and other

financial institutions 807,432 84,258 3,800 - - 895,490

Placements from banks other

financial institutions 50,411 7,268 - - - 57,679

Derivative financial liabilities - - - - 2,996 2,996

Financial assets sold under

repurchase agreements 149,719 12,143 - - - 161,862

Due to customers 1,154,334 421,334 234,971 10 2,617 1,813,266

Debt securities issued - 5,078 42,947 20,944 - 68,969

Other liabilities - - - - 27,327 27,327

Total financial liabilities 2,161,896 530,081 281,718 20,954 32,940 3,027,589

Net position (543,959) 559,326 42,033 94,409 5,524 157,333

209

The following tables illustrate the potential impact of a parallel upward or downward shift of 100 basis points in

all currencies’ yield curves on the Group’s net interest income and other comprehensive income, based on the

Group’s positions of financial assets and liabilities at the balance sheet date.

UNIT: RMB Million

The Group

12/31/2013 12/31/2012

Net interestincome

increase(decrease)

Other comprehensiveincome

increase(decrease)

Net interestincome

increase(decrease)

Other comprehensiveincome

increase(decrease)

+100 basis points 4,079 (3,438) 4,084 (3,413)

- 100 basis points (4,079) 3,650 (4,084) 3,639

UNIT: RMB Million

The Bank

12/31/2013 12/31/2012

Net interestincome

increase(decrease)

Other comprehensiveincome

increase(decrease)

Net interestincome

increase(decrease)

Other comprehensiveincome

increase(decrease)

+100 basis points 3,778 (3,396) 3,885 (3,369)

- 100 basis points (3,778) 3,606 (3,885) 3,592

The sensitivity analysis on net interest income is based on reasonably possible changes in interest rates with

the assumption that the structure of financial assets and financial liabilities held at the period end remains

unchanged.

The sensitivity analysis on other comprehensive income is the effect on changes of fixed rate available-for-

sale financial assets at the period end after adjusting in accordance with the reasonably possible changes in

interest rates.

The above prediction assumes that all yield curves of assets and liabilities, except demand deposit, shift

upward or downward parallel. Therefore it does not reflect the potential impact of non-parallel shift in yield

curves. The prediction also assumes that all positions are held to maturity. The Group anticipates that the

amount of sensitivity analysis is insignificant if a position is not held to maturity.

The assumption does not represent the group’s capital and interest rate risk management policy. Therefore

the above analysis may differ from the actual situation.

In addition, the impact of interest rate fluctuation is only for illustrating purpose, showing the anticipated net

interest income and other comprehensive income of the Group under the current interest rate risk situation.

And such impact has not taken into account the potential interest rate risk control activities carried out by the

management.

210

4.2 Foreign currency risk

The Group conducts its businesses mainly in RMB, with certain businesses denominated in USD and other

currencies. RMB is the functional currency. The foreign exchange rate is regulated by the PBOC.

The Group is mainly exposed to currency risk resulting from currency mismatches of assets and liabilities,

foreign currency transactions and foreign currency capital, etc.

The financial market department of the Bank centrally manages the currency risk. The currency risk that arises

from all types of foreign exchange transactions at the branch level should be centralized to head office to

manage the risk exposure and squares positions through the core business system.

The currency risk exposure between foreign currencies is managed on the basis of “overnight position limit”

and “day time self-trading positions”. The positions are centralized to the financial market department in a

timely way and managed centrally. This kind of position is relatively small compared to the Group’s asset scale

and is controllable.

Regarding the currency risk exposure between RMB and foreign currencies, the Group is mainly exposed to

currency risk resulting from the comprehensive positions of the RMB market maker and the position of the

foreign currency capital. As an active RMB market maker, the Group controls the position limit properly. The

comprehensive positions of the market maker are managed close to zero and the overnight positions are kept

at low level.

211

The following tables are the structure analysis of the relevant financial assets and liabilities by currency.

UNIT: RMB Million

The Group

12/31/2013

USD Other currencies

RMB RMB equivalent RMB equivalent Total

Financial assets:

Cash and balances with central bank 414,256 8,226 389 422,871

Due from banks and other

financial institutions 52,067 10,008 770 62,845

Placements with banks and other

financial institutions 86,091 1,000 - 87,091

Held-for-trading financial assets 42,295 - - 42,295

Derivative financial assets 6,101 82 231 6,414

Financial assets held under

resale agreements 921,090 - - 921,090

Loans and advances to customers 1,215,880 98,640 6,162 1,320,682

Available-for-sale financial assets 261,542 2,076 63 263,681

Debt securities classified

as receivables 328,628 - - 328,628

Finance lease receivables 46,094 - - 46,094

Held-to-maturity investments 117,319 168 168 117,655

Other assets 31,577 1,147 54 32,778

Total financial assets 3,522,940 121,347 7,837 3,652,124

Financial liabilities:

Due to banks and other

financial institutions 1,006,300 1,161 83 1,007,544

Placements from banks and other

financial institutions 49,760 28,426 86 78,272

Held-for-trading financial liabilities 1,216 - - 1,216

Derivative financial liabilities 3,993 2,769 102 6,864

Financial assets sold under

repurchase agreements 81,574 - 207 81,781

Due to customers 2,024,791 139,350 6,204 2,170,345

Debt securities issued 67,901 - - 67,901

Other liabilities 36,677 1,563 92 38,332

Total financial liabilities 3,272,212 173,269 6,774 3,452,255

Net position 250,728 (51,922) 1,063 199,869

212

UNIT: RMB Million

The Group

12/31/2012

USD Other currencies

RMB RMB equivalent RMB equivalent Total

Financial assets:

Cash and balances with central bank 384,642 6,725 264 391,631

Due from banks and other

financial institutions 140,464 23,402 776 164,642

Placements with banks and other

financial institutions 207,395 7,417 - 214,812

Held-for-trading financial assets 21,540 - - 21,540

Derivative financial assets 2,283 414 569 3,266

Financial assets held under

resale agreements 792,797 - - 792,797

Loans and advances to customers 1,101,220 85,178 18,144 1,204,542

Available-for-sale financial assets 191,007 985 65 192,057

Debt securities classified

as receivables 111,360 - - 111,360

Finance lease receivables 33,779 - - 33,779

Held-to-maturity investments 68,345 688 166 69,199

Other assets 26,624 1,267 295 28,186

Total financial assets 3,081,456 126,076 20,279 3,227,811

Financial liabilities:

Due to banks and other

financial institutions 892,861 1,400 175 894,436

Placements from banks and other

financial institutions 79,757 8,585 47 88,389

Derivative financial liabilities 1,220 1,517 259 2,996

Financial assets sold under

repurchase agreements 161,862 - - 161,862

Due to customers 1,675,241 125,232 12,793 1,813,266

Debt securities issued 68,969 - - 68,969

Other liabilities 29,882 1,335 156 31,373

Total financial liabilities 2,909,792 138,069 13,430 3,061,291

Net position 171,664 (11,993) 6,849 166,520

213

UNIT: RMB Million

The Bank

12/31/2013

USD Other currencies

RMB RMB equivalent RMB equivalent Total

Financial assets:

Cash and balances with central bank 414,068 8,226 389 422,683

Due from banks and other

financial institutions 51,535 10,008 770 62,313

Placements with banks and other

financial institutions 86,177 1,000 - 87,177

Held-for-trading financial assets 42,267 - - 42,267

Derivative financial assets 6,101 82 231 6,414

Financial assets held under

resale agreements 921,090 - - 921,090

Loans and advances to customers 1,215,880 98,640 6,162 1,320,682

Available-for-sale financial assets 258,965 2,076 63 261,104

Debt securities classified

as receivables 326,963 - - 326,963

Held-to-maturity investments 117,319 168 168 117,655

Other assets 25,835 896 54 26,785

Total financial assets 3,466,200 121,096 7,837 3,595,133

Financial liabilities:

Due to banks and other

financial institutions 1,008,176 1,161 83 1,009,420

Placements from banks and other

financial institutions 12,029 28,512 86 40,627

Held-for-trading financial liabilities 1,216 - - 1,216

Derivative financial liabilities 3,993 2,769 102 6,864

Financial assets sold under

repurchase agreements 78,449 - 207 78,656

Due to customers 2,024,791 139,350 6,204 2,170,345

Debt securities issued 67,901 - - 67,901

Other liabilities 31,941 1,562 92 33,595

Total financial liabilities 3,228,496 173,354 6,774 3,408,624

Net position 237,704 (52,258) 1,063 186,509

214

UNIT: RMB Million

The Bank

12/31/2012

RMBUSD Other currencies

TotalRMB equivalent RMB equivalent

Financial assets:

Cash and balances with central bank 384,444 6,725 264 391,433

Due from banks and other

financial institutions 140,455 23,402 776 164,633

Placements with banks and other

financial institutions 207,395 7,417 - 214,812

Held-for-trading financial assets 21,540 - - 21,540

Derivative financial assets 2,283 414 569 3,266

Financial assets held under

resale agreements 792,797 - - 792,797

Loans and advances to customers 1,101,072 85,178 18,144 1,204,394

Available-for-sale financial assets 189,034 985 65 190,084

Debt securities classified

as receivables 110,178 - - 110,178

Held-to-maturity investments 68,345 688 166 69,199

Other assets 21,024 1,267 295 22,586

Total financial assets 3,038,567 126,076 20,279 3,184,922

Financial liabilities:

Due to banks and other

financial institutions 893,915 1,400 175 895,490

Placements from banks and other

financial institutions 49,047 8,585 47 57,679

Derivative financial liabilities 1,220 1,517 259 2,996

Financial assets sold under

repurchase agreements 161,862 - - 161,862

Due to customers 1,675,241 125,232 12,793 1,813,266

Debt securities issued 68,969 - - 68,969

Other liabilities 25,836 1,335 156 27,327

Total financial liabilities 2,876,090 138,069 13,430 3,027,589

Net position 162,477 (11,993) 6,849 157,333

215

The table below indicates the potential effect of an appreciation or depreciation of RMB spot and forward

exchange rate against all other currencies by 5% on the foreign exchange gains or losses.

UNIT: RMB Million

The Group2013

Foreign ExchangeIncrease/(Decrease)

2012Foreign Exchange

Increase/(Decrease)

5% appreciation 238 (32)

5% depreciation (238) 32

UNIT: RMB Million

The Bank2013

Foreign ExchangeIncrease/(Decrease)

2012Foreign Exchange

Increase/(Decrease)

5% appreciation 255 (32)

5% depreciation (255) 32

The above sensitivity analysis is measured on the basis that all assets and liabilities have a static currency

risk structure. The relevant assumptions are:

(1) The exchange rate sensitivity represents the exchange gains or losses arisen from a 5% change of the

closing exchange rates (middle price) of the different foreign currencies against RMB at the balance sheet

date;

(2) The exchange rate changes of different foreign currencies against RMB move in the same direction

simultaneously.

The effect on foreign exchange gains or loss is based on the assumption that the Group’s net positions of

foreign exchange sensitivity and foreign exchange derivative instruments at the end of the reporting period

remain unchanged. The Group mitigates its foreign currency risk through active management of its foreign

currency exposures and appropriate use of derivative instruments, based on the management expectation

of future foreign currency movements, and therefore the above sensitivity analysis may differ from the actual

situation.

4.3 Other price risk

Other price risk mainly derives from equity investment, held-for-trading precious metals investment and other

bonds and derivatives linked to commodity price.

The Group considers that the market risk of commodity price or stock price from portofolio is insignificant.

216

5. Liquidity risk

Liquidity risk refers to the risk of being unable to acquire sufficient funds in time or failing to acquire

sufficient funds at a reasonable cost to meet repayment obligations for asset growth or other business. The

Group’s liquidity risk mainly derives from advanced or concentrated withdrawal, principal-guaranteed wealth

management products redemption, deferred loan repayment and mismatches of assets and liabilities.

The assets and liabilities management committee of the Group monitors and manages the liquidity risk of the

Group. The committee will determine the liquidity risk management strategy, the monitoring indicators and the

alarming index, regularly analyse and discuss the liquidity risk assessment report submitted, and determine

the liquidity risk management measures.

The financial planning department is responsible for: (1) drafting liquidity risk management policies and

measures; (2) monitoring different types of liquidity ratios and exposure indicators. The planning and financial

department monitors the liquidity risk ratios monthly by reviewing the assets’ and liabilities’ structure. If there

are any ratios close to or over the alarming limits, the department has to investigate the reasons and make

recommendations to adjust the assets’ and liabilities’ structure accordingly; (3) analysing the liquidity risk

and reporting to the assets and liability management committee regularly; and (4) daily operation of liquidity

management, establishment of a cash position forecast system at the Bank level in order to meet the cash

payment needs and assure the liquidity for the business development requirements.

The Group regularly monitors the surplus reserve ratio, liquidity ratio, loan-to-deposit ratio and sets alarming

and security limits for each ratio. The Group also prepares general liquidity analysis report based on liquidity

indicators recorded and net cash flow position of assets and liabilities, incorporating the consideration of

macro economy and interbank liquidity status. The report is submitted to the assets and liabilities management

committee for assessment. The assessment report will be submitted together with credit risk, liquidity risk and

market risk to the risk management committee of the Board of Directors for the analysis of the Group’s overall

risk assessment to determine the management strategy accordingly.

5.1 A maturity analysis of financial assets and liabilities of the Group as follows

The following tables are the structure analysis of non-derivative financial assets and liabilities by contractual

maturities at the balance sheet date. The amounts disclosed in each term are the undiscounted contractual

cash flows.

217

The

Gro

up

12/3

1/20

13

On

dem

and

Less

than

1

mon

th

1 to

3

mon

ths

3 m

onth

s to

1 ye

ar1

to 5

yea

rsO

ver

5

year

s

Pas

t due

/

unda

ted

Tota

l

Non

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ivat

ive

finan

cial

ass

ets:

Cas

h an

d ba

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es w

ith c

entr

al b

ank

72,9

83-

--

--

350,

072

423,

055

Due

from

ban

ks a

nd o

ther

fina

ncia

l ins

titut

ions

10,7

8215

,940

7,35

019

,013

11,5

29-

2164

,635

Pla

cem

ents

with

ban

ks a

nd o

ther

fi

nanc

ial i

nstit

utio

ns-

17,6

4224

,513

44,7

161,

985

-68

88,9

24

Hel

d-fo

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adin

g fin

anci

al a

sset

s28

1,18

79,

366

14,4

1521

,536

1,03

4-

47,5

66

Fin

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al a

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s he

ld u

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res

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agre

emen

ts-

198,

351

229,

812

309,

964

267,

904

--

1,00

6,03

1

Loa

ns a

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dvan

ces

to c

usto

mer

s-

117,

234

159,

333

655,

207

336,

105

293,

561

11,1

871,

572,

627

Ava

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le fi

nanc

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s44

53,

324

7,68

443

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197,

699

63,9

01-

316,

584

Deb

t sec

uriti

es c

lass

ified

as

rece

ivab

les

-19

,001

13,7

6891

,873

216,

280

45,8

26-

386,

748

Fin

anci

al le

ase

rece

ivab

les

-1,

080

2,48

010

,549

37,1

844,

147

-55

,440

Hel

d-to

-mat

urity

inve

stm

ents

-23

05,

434

4,66

542

,201

130,

178

122

182,

830

Oth

er n

on-d

eriv

ativ

e fin

anci

al a

sset

s1,

040

723

758

1,99

85,

228

1,06

116

210

,970

Tota

l no

n-d

eriv

ativ

e fi

nan

cial

ass

ets:

85,2

7837

4,71

246

0,49

81,

195,

931

1,13

7,65

153

9,70

836

1,63

24,

155,

410

Non

-der

ivat

ive

finan

cial

liab

ilitie

s:

Due

to b

anks

and

oth

er fi

nanc

ial i

nstit

utio

ns21

5,94

830

1,44

828

9,94

420

0,37

515

,365

--

1,02

3,08

0

Pla

cem

ents

from

ban

ks a

nd o

ther

fi

nanc

ial i

nstit

utio

ns-

22,8

0219

,826

32,0

815,

507

--

80,2

16

Hel

d-fo

r-tr

adin

g fin

anci

al li

abili

ties

1,21

6-

--

--

-1,

216

Fin

anci

al a

sset

s so

ld u

nder

r

epur

chas

e ag

reem

ents

-38

,531

28,7

4811

,847

3,74

3-

-82

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Due

to c

usto

mer

s1,

004,

072

179,

031

243,

254

533,

653

268,

940

346

-2,

229,

296

Deb

t sec

uriti

es is

sued

-3,

000

144

4,83

150

,043

23,4

27-

81,4

45

Oth

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anci

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abili

ties

3,11

13,

669

108

591

3,68

766

118

812

,015

Tota

l no

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nan

cial

liab

iliti

es1,

224,

347

548,

481

582,

024

783,

378

347,

285

24,4

3418

83,

510,

137

Net

po

siti

on

(1,1

39,0

69)

(173

,769

)(1

21,5

26)

412,

553

790,

366

515,

274

361,

444

645,

273

UN

IT:

RM

B M

illio

n

218

The

Gro

up

12/3

1/20

12

On

dem

and

Less

than

1

mon

th

1 to

3

mon

ths

3 m

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s to

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to 5

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ver

5

year

s

Pas

t due

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l

Non

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finan

cial

ass

ets:

Cas

h an

d ba

lanc

es w

ith c

entr

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ank

98,8

02-

--

--

292,

970

391,

772

Due

from

ban

ks a

nd o

ther

fina

ncia

l ins

titut

ions

24,9

4943

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19,2

5774

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4,85

3-

2116

7,02

5

Pla

cem

ents

with

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fi

nanc

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42,7

7177

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100,

872

--

6822

1,36

4

Hel

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al a

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204

2,65

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11,8

803,

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-24

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Fin

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111,

904

247,

104

345,

989

120,

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--

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076

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to c

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mer

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55,1

3814

2,43

360

5,94

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227

8,37

07,

318

1,41

9,70

0

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6,28

331

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129,

234

51,7

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220,

834

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as

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78,0

5610

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735

8,25

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1,84

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ents

-30

696

4,24

819

,204

83,7

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610

8,04

1

Oth

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on-d

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ativ

e fin

anci

al a

sset

s69

379

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32,

160

5,22

244

74

9,80

9

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l no

n-d

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ativ

e fi

nan

cial

ass

ets:

125,

437

257,

576

502,

603

1,21

3,38

272

6,92

243

0,64

530

0,50

73,

557,

072

Non

-der

ivat

ive

finan

cial

liab

ilitie

s:

Due

to b

anks

and

oth

er fi

nanc

ial i

nstit

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ns15

7,18

035

3,49

330

3,94

184

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3,86

7-

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2,94

6

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ents

from

ban

ks a

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fi

nanc

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nstit

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ns-

36,8

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-89

,672

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anci

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ld u

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r

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reem

ents

-11

6,25

534

,584

12,1

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--

162,

949

Due

to c

usto

mer

s86

9,48

211

2,45

817

0,87

046

0,08

229

0,90

812

-1,

903,

812

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t sec

uriti

es is

sued

--

144

7,08

453

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24,5

59-

85,6

73

Oth

er n

on-d

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ativ

e fin

anci

al li

abili

ties

2,72

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151

1,13

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582

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12,4

78

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n-d

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nan

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liab

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es1,

029,

382

623,

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594,

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351,

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25,1

5396

53,

157,

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Net

po

siti

on

(903

,945

)(3

65,8

42)

(29,

403)

618,

385

375,

313

405,

492

299,

542

399,

542

UN

IT:

RM

B M

illio

n

Ass

ets

ava

ilab

le t

o m

ee

t a

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f th

e l

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ilitie

s a

nd

ou

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ing

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in

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al

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d h

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ble

on

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nd

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exp

ect

ed

to

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ed

. In

ad

diti

on

, th

e G

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p is

ab

le t

o s

ell

the

ava

ilab

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or-

sale

fin

an

cia

l ass

ets

to r

ep

ay

the

ma

ture

d li

ab

ilitie

s if

ne

cess

ary

.

219

UN

IT:

RM

B M

illio

n

The

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k

12/3

1/20

13

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dem

and

Less

than

1

mon

th

1 to

3

mon

ths

3 m

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to 5

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t due

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Tota

l

Non

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72,9

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--

349,

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868

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11,5

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7,35

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17,6

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198,

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117,

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as

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-18

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13,7

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214,

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45,8

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-23

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130,

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122

182,

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43,

639

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nan

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ets:

85,5

6537

2,31

445

7,84

71,

183,

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1,09

2,47

653

3,31

836

1,29

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086,

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finan

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liab

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s:

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to b

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7,82

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1,44

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9,94

420

0,37

515

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243,

254

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296

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Oth

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226,

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544,

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575,

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759,

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334,

735

23,7

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3,46

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po

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424,

346

757,

741

509,

538

361,

290

622,

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220

The

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574

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24,9

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19,2

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4,85

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7,01

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with

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111,

904

247,

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989

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--

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2,42

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5,78

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0,49

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28

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182

4,27

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77,3

7810

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6,95

7

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stm

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696

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610

8,04

1

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3,10

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1

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2,86

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9430

0,31

03,

505,

806

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ive

finan

cial

liab

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s:

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nanc

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949

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2,72

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436

620,

707

526,

092

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228

349,

065

24,6

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3,12

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Net

po

siti

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(905

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63,8

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31,1

2334

3,80

3 4

02,7

8430

0,31

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82,6

68

UN

IT:

RM

B M

illio

n

221

5.2 Liquidity risk analysis of derivative instruments

(i) Derivative settled on a net basis

Derivatives that will be settled on a net basis are mainly interest rate related and credit related. The tables

below set forth the Group’s net derivative financial instruments positions by remaining contractual maturities at

the balance sheet date. The amounts disclosed in the tables are the undiscounted contractual cash flows.

UNIT: RMB Million

The Group and the Bank

12/31/2013

Less than 1 month 1-3 months 3-12 months 1-5 years Over 5 years Total

Interest rate derivatives (12) 44 10 137 - 179

Other derivatives (99) - 34 - - (65)

Total (111) 44 44 137 - 114

UNIT: RMB Million

The Group and the Bank

12/31/2012

Less than 1 month 1-3 months 3-12 months 1-5 years Over 5 years Total

Interest rate derivatives (2) 16 55 74 - 143

Other derivatives (68) - 45 - - (23)

Total (70) 16 100 74 - 120

222

(ii) Derivatives settled on a gross basis

The Group’s derivatives that will be settled on a gross basis refer to exchange rate derivatives and precious

metals forward with delivery precious metals. The tables below set forth the Group’s positions by remaining

contractual maturities at the balance sheet date. The amounts disclosed in the tables are the undiscounted

contractual cash flows.

UNIT: RMB Million

The Group and the Bank

12/31/2013

Less than 1 month

1-3 months 3-12 months 1-5 years Over 5 years Total

Exchange rate derivatives

-Cash inflow 255,110 107,253 128,201 12,588 - 503,152

-Cash outflow (255,208) (107,422) (128,514) (12,589) - (503,733)

Other derivatives

-Cash inflow - - - - - -

-Cash outflow - - (190) - - (190)

Total (98) (169) (503) (1) - (771)

UNIT: RMB Million

The Group and the Bank

12/31/2012

Less than 1 month

1-3 months 3-12 months 1-5 years Over 5 years Total

Exchange rate derivatives

-Cash inflow 224,307 51,755 140,426 1,037 - 417,525

-Cash outflow (224,265) (51,716) (140,328) (1,037) - (417,346)

Other derivatives - - - - - -

-Cash inflow - - - - - -

-Cash outflow - - (618) - - (618)

Total 42 39 (520) - - (439)

223

5.3 Off-balance sheet items

The Group’s off-balance sheet items mainly include credit card commitments, letters of credit, letters of

guarantee and bank acceptances. The tables below set forth the amounts of the off-balance sheet items by

remaining maturity.

UNIT: RMB Million

The Group and the Bank

12/31/2013 12/31/2012

Less than 1 year

1-5 yearsOver 5

yearsTotal

Less than 1 year

1-5 years

Over 5 years

Total

Credit card commitments 41,341 - - 41,341 6,450 - - 6,450

Letter of credit 129,150 233 - 129,383 69,137 96 - 69,233

Letter of guarantee 19,011 10,403 23,738 53,152 13,108 4,780 7,541 25,429

Bank acceptances 452,710 - - 452,710 392,352 - - 392,352

Reimbursement refinances - - - - 50,004 - - 50,004

Total 642,212 10,636 23,738 676,586 531,051 4,876 7,541 543,468

6. Capital Management

During the year, the Group had conscientiously implemented the capital management policy according to the

regulations of China Banking Regulatory Commission “Administrative Measures for the Capital of Commercial

Banks (for Trial Implementation)”. As per “2011-2015 Development Strategy Plan” and “2013-2018 Capital

Adequacy Standards Planning of Transition Period”, from the perspective of business strategy, risk conditions

and regulatory requirements, the Group will achieve healthy, sustainable and rapid development in order

to ensure capital adequacy ratio and the overall strategic development match with risk preference and risk

management capabilities.

According to the principle that total amount of available capital matchs the Group’s current and future business

development plans, the Group will issue no more than CNY20 billion write-downs tier 2 bonds in domestic and

foreign markets based on regulatory policies and market conditions, which has been reviewed and approved

in the board of directors and the shareholders’ meeting and currently is waiting for regulatory authorities to

approve.

The Group strengthened capital allocation in the internal management, orienting towards to the target risk

assets ratio, co-ordinate the arrangements for the various operating divisions, business lines of the size of

the risk-weighted assets, to promote the optimal allocation of capital, in order to maximize shareholders’ risk-

adjusted return

According to related guidelines of CBRC, “Administrative Measures for the Capital of Commercial Banks (for

Trial Implementation)” and other regulations, the Group monitors its capital adequacy and capital application in

real time.

224

7. Fair value of financial instruments

7.1 Financial instruments measured at fair value

Fair values of the financial assets and financial liabilities are determined as follows:

(i) The fair value of financial assets and financial liabilities with standard terms and conditions and traded on

active markets are determined with reference to quoted market bid prices and ask prices respectively;

(ii) The fair value of other financial assets and financial liabilities (excluding derivative instruments) are

determined in accordance with generally accepted pricing models based on discounted cash flow analysis or

using prices from observable current market transactions;

(iii) The fair value of derivative instruments are determined with reference to quoted market prices in active

markets. Where such quoted prices are not available, the fair value of a non-option-based derivative is

estimated using discounted cash flow analysis and on the basis of the applicable yield curve. For an option-

based derivative, the fair value is estimated using option pricing model (for example, the binomial model).

Fair values of financial instruments are determined and disclosed as the following levels:

Level 1 – those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 – those derived from inputs other than quoted prices included within Level 1 that are observable for

the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);

Level 3 – those derived from valuation techniques that include inputs for the asset or liability that are not

based on observable market data (unobservable inputs).

225

The following tables summarize the analysis for financial instruments using the three-level fair value hierarchy

determination.

UNIT: RMB Million

The Group

12/31/2013 12/31/2012

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Financial assets:

Held-for-trading financial assets 28 42,267 - 42,295 - 21,540 - 21,540

Derivative financial assets - 6,414 - 6,414 - 3,266 - 3,266

Available-for-sale financial assets 214 184,658 78,809 263,681 407 135,717 55,933 192,057

Total 242 233,339 78,809 312,390 407 160,523 55,933 216,863

Financial liabilities:

Held-for-trading financial liabilities - 1,216 - 1,216 - - - -

Derivative financial liabilities - 6,864 - 6,864 - 2,996 - 2,996

Total - 8,080 - 8,080 - 2,996 - 2,996

UNIT: RMB Million

The Bank

12/31/2013 12/31/2012

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Financial assets:

Held-for-trading financial assets - 42,267 - 42,267 - 21,540 - 21,540

Derivative financial assets - 6,414 - 6,414 - 3,266 - 3,266

Available-for-sale financial assets 15 182,565 78,524 261,104 18 134,752 55,314 190,084

Total 15 231,246 78,524 309,785 18 159,558 55,314 214,890

Financial liabilities:

Held-for-trading financial liabilities - 1,216 - 1,216 - - - -

Derivative financial liabilities - 6,864 - 6,864 - 2,996 - 2,996

Total - 8,080 - 8,080 - 2,996 - 2,996

There are no transfers from Level 1 and Level 2 to Level 3, and no transfers between Level 1 and Level 2 for

the fair value measurements of the Group’s financial instruments in 2013 and in 2012.

226

Reconciliation of Level 3 fair value measurements for financial assets and financial liabilities is as follows:

UNIT: RMB Million

Available-for-sale financial assetsThe Group

12/31/2013 12/31/2012

Opening balance 55,933 13,966

Total profit or loss 5,588 1,411

Profit 5,588 1,411

Purchases/disposals 36,315 46,106

Settlements (19,027) (5,550)

Closing balance 78,809 55,933

Profit or loss from assets/liabilities held

at the end of each year 3,498 1,206

UNIT: RMB Million

Available-for-sale financial assetsThe Bank

12/31/2013 12/31/2012

Opening balance 55,314 13,781

Total profit or loss 5,513 1,405

Profit 5,513 1,405

Profit 36,724 45,096

Settlements (19,027) (4,968)

Closing balance 78,524 55,314

Profit or loss from assets/liabilities held

at the end of each year 3,423 1,200

227

7.2 Financial instruments measured at amortized cost

The following tables disclose the carrying amount and the fair values of financial assets and financial liabilities

which are not measured at fair value at the balance sheet date. The following tables do not include items

whose carrying amount and fair values are close, such as balances with central bank, due from banks and

other financial institutions, placements with banks and other financial institutions, financial assets held under

resale agreements, borrowings from central bank, placements from banks and other financial institutions,

financial assets sold under repurchase agreements, etc.

UNIT: RMB Million

The Group

12/31/2013 12/31/2012

Carrying amount Fair value Carrying amount Fair value

Financial assets:

Loans and advances to customers 1,320,682 1,320,633 1,204,542 1,205,895

Held-to-maturity investments 117,655 109,470 69,199 69,093

Debt securities issued 328,628 328,113 111,360 111,117

Total 1,766,965 1,758,216 1,385,101 1,386,105

Financial liabilities:

Due to customers 2,170,345 2,176,810 1,813,266 1,817,309

Debt securities issued 67,901 62,004 68,969 68,351

Total 2,238,246 2,238,814 1,882,235 1,885,660

UNIT: RMB Million

The Bank

12/31/2013 12/31/2012

Carrying amount Fair value Carrying amount Fair value

Financial assets:

Loans and advances to customers 1,320,682 1,320,633 1,204,394 1,205,747

Held-to-maturity investments 117,655 109,470 69,199 69,093

Debt securities classified as receivables 326,963 326,483 110,178 109,935

Total 1,765,300 1,756,586 1,383,771 1,384,775

Financial liabilities:

Due to customers 2,170,345 2,176,810 1,813,266 1,817,309

Debt securities issued 67,901 62,004 68,969 68,351

Total 2,238,246 2,238,814 1,882,235 1,885,660

All of the above-mentioned assumptions and methods provide a consistent basis for the calculation of the fair

values of the Group’s assets and liabilities. However, other institutions may use different assumptions and

methods. Therefore, the fair values disclosed by different financial institutions may not be entirely comparable.

228

XIV. OTHER SIGNIFICANT EVENTThe Hong Kong Monetary Authority granted a banking license to the Bank on 10 January 2014 (license

number: B317) with immediate effect. The Bank will strictly comply with relevant laws and regulatory

requirements in Hong Kong to conduct banking business.

XV. FINANCIAL STATEMENTS APPROVEDThe financial statements were approved by the Board of Directors on 28 March 2014.

END OF FINANCIAL STATEMENTS

SUPPLEMENTARY INFORMATION

YEAR 2013

1. Breakdown of non-recurring profit or loss

The following table is in accordance with the requirement of “Information Disclosure and Presentation Rules

for Companies Making Public Offering of Securities No. 1-Non-recurring Profit or Loss (2008)” (ZJHGG [2008]

No.43) issued by China Securities Regulatory Commission.

UNIT: RMB Million

The Group

2013 2012

Gains and losses on the disposal of non-current assets (28) (2)

Government grants recognised in profit or loss 162 119

Recovery of assets written-off in previous years 113 54

Net non-operating income and expense in addition to the above 49 8

Subtotal 296 179

Impact on income tax expenses (83) (46)

Net earnings attributable to the parent company shareholders 213 133

Net earnings attributable to the parent company shareholders,

after deduction of non-recurring gains and losses 40,998 34,585

Non-recurring profit or loss refers to the profit or loss not related to normal business or the profit or loss which

is related to normal business but affects the user of financial statements to make correct judgement for the

company’s financial position and financial performance because of its distinctiveness and non-recurring.

Considering the nature of its normal business, Industrial Bank Co., Ltd. (hereinafter referred to as “the Bank”)

does not include “investment income from financial assets designated as at fair value through profit or loss,

financial liabilities designated as at fair value through profit or loss and available-for-sale financial assets” in

non-recurring profit or loss.

229

2. Return on net assets and earnings per share

The related data is calculated in accordance with the provisions in the Rule No.9 for the Preparation of

Information Disclosure of Companies with Public Offering – the Calculation and Disclosure of ROE and EPS

(revised in 2010). In the related period, basic EPS is calculated by dividing net profit by weighted average

ordinary shares issued.

2013

The Group

Weighted averageROE (%)

Basic EPS(RMB Yuan per share)

Net profit attributable to shareholders of the Bank 22.39 2.16

Net profit attributable to shareholders of the Bank,

after deduction of non-recurring profit or loss 22.27 2.15

2012

The Group

Weighted averageROE (%)

Basic EPS(RMB Yuan per share)

Net profit attributable to shareholders of the Bank 26.65 2.15

Net profit attributable to shareholders of the Bank,

after deduction of non-recurring profit or loss 26.54 2.14

The Group has no diluted potential ordinary share.

230

THE COMPANY’S ORGANIzATIONAL STRUCTURE

231

Asset & Liability Management Center

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